1. Crescent Industries management is planning on replacing some machinery in its plant. The projected cash flows are shown below. The firm uses an 18% cost of capital. Compute the NPV of the proposed investment opportunity.

Net Present Value Calculations

Year	Cash Flow
0	($3,300,000)
1	$875,123
2	$966,222
3	$1,145,000
4	$1,250,399
5	$1,504,455

2. Spokane Company uses a lock box in Seattle. They process $300,000 in checks a day, and the average check size is $250. The process saves two days in float and one half-day in processing. The bank charges 15 cents per check. There are 270 business days in the year. The company figures it costs them 4% to carry the accounts receivable. Which method is better: lock box or carrying the accounts for an extra 2.5 days?

3. Explain the difference between a competitive and negotiated cash sale. Which method of sale is likely to yield the lowest funding cost for firms selling plain vanilla bonds in stable markets?

4. Explain why the owners of a company might choose to keep it private.

5. Explain why managers of firms might prefer that their firms stock be traded in a moderate per-share range rather than a high-share price range. How do firms keep their shares trading in that range?

6. Explain what rating agencies are and what effect their ratings have on bonds.