1. Consider the following two mutually exclusive projects:

Year	Cash Flow (A)	Cash Flow (B)
0	$365,000	$40,000
1	38,000	20,300
2	47,000	15,200
3	62,000	14,100
4	455,000	11,200

The required return on these investments is 13 percent.

Required:
(a)	What is the payback period for each project? (Do not round intermediate calculations. Round your answers to 2 decimal places (e.g., 32.16).)

	Payback period
Project A	years
Project B	years

(b)	What is the NPV for each project? (Do not round intermediate calculations. Round your answers to 2 decimal places (e.g.,32.16).)

	Net present value
Project A	$
Project B	$

(c)	What is the IRR for each project? (Do not round intermediate calculations. Enter your answer as a percentage rounded to 2 decimal places (e.g., 32.16).)

	Internal rate of return
Project A	%
Project B	%

(d)	What is the profitability index for each project? (Do not round intermediate calculations. Round your answers to 3 decimal places (e.g., 32.161).)

	Profitability index
Project A
Project B

(e)	Based on your answers in (a) through (d), which project will you finally choose?
	(Click to select)Project AProject B

1. Bond X is a premium bond making annual payments. The bond has a coupon rate of 9 percent, a YTM of 7 percent, and has 13 years to maturity. Bond Y is a discount bond making annual payments. This bond has a coupon rate of 7 percent, a YTM of 9 percent, and also has 13 years to maturity. Assume the interest rates remain unchanged.

Requirement 1:

What are the prices of these bonds today? (Do not round intermediate calculations. Round your answers to 2 decimal places (e.g., 32.16).)

	Prices
Bond X	$
Bond Y	$

Requirement 2:

What do you expect the prices of these bonds to be in one year? (Do not round intermediate calculations. Round your answers to 2 decimal places (e.g., 32.16).)

	Prices
Bond X	$
Bond Y	$

Requirement 3:

What do you expect the prices of these bonds to be in three years? (Do not round intermediate calculations. Round your answers to 2 decimal places (e.g., 32.16).)

	Prices
Bond X	$
Bond Y	$

Requirement 4:

What do you expect the prices of these bonds to be in eight years? (Do not round intermediate calculations. Round your answers to 2 decimal places (e.g., 32.16).)

	Prices
Bond X	$
Bond Y	$

Requirement 5:

What do you expect the prices of these bonds to be in 12 years? (Do not round intermediate calculations. Round your answers to 2 decimal places (e.g., 32.16).)

	Prices
Bond X	$
Bond Y	$

Requirement 6:

What do you expect the prices of these bonds to be in 13 years? (Do not round intermediate calculations. Round your answers to 2 decimal places (e.g., 32.16).)

	Prices
Bond X	$
Bond Y	$

1. Say you own an asset that had a total return last year of 15 percent. Assume the inflation rate last year was 2.5 percent.

Required:

What was your real return? (Do not round intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).)

Real return

%