1). Delta Inc. is considering the purchase of a new machine which is expected to increase sales by $10,000 in addition to increasing non-depreciation expenses by $3,000 annually. Due to the sales increase, Delta will need to increase working capital by $1,000 at the beginning of the project. Delta will depreciate the machine using the straight-line method over the project's five year life to a salvage value of zero. The machine's purchase price is $20,000. The firm has a marginal tax rate of 34 percent, and its required rate of return is 12 percent.

1a) The machine's initial cash outflow is?

1b)The machine's incremental after-tax cash inflow for year 1 is?

1c) The machine's after-tax incremental cash flow in year five is?

1d) The machine's NPV is?

1e)The machine's IRR is?

2) There is a 30% probability that an office building will be sold after 5 years for $30 million, a 50% probability that it will be sold for $20 million and a 20% probability that it will be sold for $10 million. What is the expected value of the office building in 5 years?

3) Callahan Stoves expects to sell 1,200 wood pellet stoves in 2011 at an average price of $2,400 each. It believes that unit sales will grow between -5% and +5% per year and prices will rise or fall by as much as 5% per year. Forecast sales revenue for 2013 if the number of units sold increases by 5% per year and prices remain flat.

Use the following information to answer the following question(s).

4). The following data concerning

Hemond Companys capital structure is available.

$ millions	Book Values	Market Values
Accounts Payable & Accruals	$300
Short-term notes	$150	$150
Long-term debt	$450	$600
Preferred Stock	$75	$150
Common Stock	$600	$1500

4a) The percentage of common stock in Hemond's weighted average cost of capital is

4b) The percentage of debt in Hemond's weighted average cost of capital is

4c) The percentage of preferred stock in Hemond's weighted average cost of capital is

4d) The total capital that should be used in computing the weights for Hemonds WACC is