1. CF1 = 75

CF2 = 75

CF3 = 75

d = 15%

FIND: Present Value (PV)

2.CF = 100

g = 0

d = 20%

Assume the Cash Flow is annual and perpetual

FIND: PV

3.CF0 = -100 (this is the investment)

CF1 = 30

CF2 = 50

CF3 = 60

CF4 = 90

WACC = 12%

FIND: Payback in Years

4. Based upon the information in #3,

FIND: Net Present Value (NPV)

5.Next years numbers include these:

EBIT = 1,000

Depreciation = 250

Taxes = 100

Net increase in Working Capital = 50

Net Increase in Capital Expenditure = 250

Long-term sustainable growth = 4%

Risk free rate = 3%

Beta = 1.5%

Equity Risk Premium = 7%

D/E = 0.333

Investment = -$10,000 (occurs at time = 0)

Cost of debt (prior to tax adjustment) = 7%

Corporate tax rate = 33%

FIND: Net Present Value (NPV). Use CFFA for cash flow and WACC for the discount rate.

6.CF0 = -6,750

CF1 = 3,000

CF2 = 3,000

CF3 = 3,000

WACC = 14%

FIND: NPV

7.RFR = 2%

Beta = 1.1

ERP = 6.0%

D/E = 1.0

Cost of debt prior to tax adjustment = 4%

Corporate tax rate = 35%

FIND: WACC

8.CF0 = -1,000

CF1 = 50

CF2 = 250

CF3 = 450

CF4 = 200

CF5 = 1,200

WACC = 8%

FIND: NPV

9. Given the cash flows in the problem above, FIND the Payback, in years.

10. Given these cash flow numbers for next year:

Net Income = 4,000

Interest Expense = 500

Depreciation = 800

Net increase in Working Capital = 100

Net Capital Expenditure = 900

Taxes = 1,000

Initial Investment = -25,000 (occurs at time = 0)

Risk free rate = 5%

Beta = 2.0

ERP = 7.5%

D/E = 0.5

Cost of debt capital prior to adjustment = 6%

Corporate tax rate = 35%

long term stable growth = 2.5%

FIND: NPV (use CFFA1 and WACC)