1.

1 The outstanding bonds of Tech Express are priced at $989 and mature in 8 years. These bonds have a 6 percent coupon, a yield-to-maturity of 6.18 percent and pay interest annually. The firm's tax rate is 39 percent. What is the firm's after-tax cost of debt?

2.

2 You are considering a project with an initial cost of $7,800. What is the payback period for this project if the cash inflows are $1,100, $1,640, $3,800, and $4,500 a year over the next four years, respectively?

3.

3 A project has an initial cost of $6,500. The cash inflows are $900, $2,200, $3,600, and $4,100 over the next four years, respectively. What is the payback period?

4.

4 Panelli's is analyzing a project with an initial cost of $102,000 and cash inflows of $65,000 in year one and $74,000 in year two. This project is an extension of the firm's current operations and thus is equally as risky as the current firm. The firm uses only debt and common stock to finance its operations and maintains a debt-equity ratio of 0.45.The after-tax cost of debt is 4.8 percent, the cost of equity is 12.7 percent, and the tax rate is 35 percent. What is the projected net present value of this project?

HINT:AND

5.

5 The Bakery is considering a new project. The project has an initial cash outlay of $62,000 and projected cash inflows of $17,000 in year one, $28,000 in year two, and $30,000 in year three. The firm uses 25 percent debt and 75 percent common stock as its capital structure. The company's cost of equity is 15.5 percent while the after-tax cost of debt for the firm is 6.1 percent. What is the projected net present value of the new project?

6.

6 Sister Pools sells outdoor swimming pools and currently has an after-tax cost of capital of 11.6 percent.The sales manager of Sister Pools estimates that a new line of water features and fountains would produce 20 percent of the firm's future total sales. The initial cash outlay for this project would be $85,000. The expected net cash inflows are $16,000 a year for 7 years. What is the net present value of the Sister Pools project?

7.

7 What is the net present value of a project with the following cash flows if the required rate of return (cost of capital) is 12.0 percent?

8.

8 Ryder Industries is considering a project that will produce cash inflows of $92,000 a year for five years. What is the internal rate of return if the initial cost of the project is $275,000?

9.

9 Charles Henri is considering investing $36,000 in a project that is expected to provide him with cash inflows of $12,000 in each of the first two years and $18,000 for the following year. At a discount rate of zero percent this investment has a net present value of _____, but at the relevant discount rate of 17 percent the project's net present value is _____.

10.

10 Quality Tools, Inc. needs to purchase a new machine costing $2,080,000. Management is estimating the machine will generate cash inflows of $376,000 for seven years. If management requires a minimum 8.0 percent rate of return, should the firm purchase this particular machine?(Find the Internal Rate of Return) Why or why not?