1. A firms income statement included the following data. The firms average tax rate was 20%.

Cost of goods sold	$ 8,800
Income taxes paid	2,800
Administrative expenses	3,800
Interest expense	1,800
Depreciation	1,800

a.	What was the firms net income?

Net income

$

b.	What must have been the firms revenues?

Revenues

$

c.	What was EBIT?

EBIT

$

2.

Consider three bonds with 5.0% coupon rates, all making annual coupon payments and all selling at a face value of $1,000. The short-term bond has a maturity of 4 years, the intermediate-term bond has maturity 8 years, and the long-term bond has maturity 30 years.

a.	What will be the price of each bond if their yields increase to 6.0%? (Do not round intermediate calculations. Round your answers to 2 decimal places.)

	4 Years	8 Years	30 Years
Bond price	$	$	$

b.	What will be the price of each bond if their yields decrease to 4.0%? (Do not round intermediate calculations. Round your answers to 2 decimal places.)

	4 Years	8 Years	30 Years
Bond price	$	$	$

c.

Are long-term bonds more or less affected than short-term bonds by a rise in interest rates?

	More affected
	Less affected

d.

Would you expect long-term bonds to be more or less affected by a fall in interest rates?

	More affected
	Less affected

3.

Investments in the stock market have increased at an average compound rate of about 5% since 1918. It is now 2013.

a.	If you invested $1,000 in the stock market in 1918, how much would that investment be worth today? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

Investment

$

b.	If your investment in 1918 has grown to $1 million, how much did you invest in 1918? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

Present value

$

3.

The following are the cash flows of two projects:

Year		Project A					Project B
0			$	290				$	290
1				170					190
2				170					190
3				170					190
4				170

What are the internal rates of return on projects A and B? (Enter your answers as a percent rounded to 2 decimal places.)

Project	IRR
A	%
B	%