1. Project A and project B are two independent projects. Project A has a Pl of .98, and Project B has a Pl of 1.95. What is your decision regarding the two projects?

Select one:

a. Project A should be rejected, and project B should be accepted.

b. Both Proiect A and proiect B should be rejected.

c. Both Project A and project B should be accepted.

d. Proiect A should be accepted, and project B should be rejected.

2. A firm is considering an investment proposal that has an initial cost of $25,000 and cash inflows of $10,000 after tax per year for the next 5 years. The discounted cash inflows are valued at $30,000. What is the profitability index of this project?

Select one:

a. 1.2

b. 2.0

c. 1.0

d. 2.2

3. A firm is considering the undertaking of a project with CFo = $200, CF1 = $75, CF2 = $90, CF3 = $120. The cost of capital is 15%. What is the approximate IRR for this project?

Select one:

. 6.086%

b. 15.000%

c. 18.355%

d. 6.086%

4. Project A requires an initial investment of $20,500, a cash inflow of $15,500 in the first year, and inflows of $10,000 each year for the next 2 years. What is the payback period for this project?

Select one:

a. 1.5 years

b. 2.5 years

c. 3.0 years

d. 1.32 years

5. You observe that a firm has a beta of 1.25, the expected return on the market portfolio is 10%, and the risk free rate of return is equal to 3%. What is the estimated cost of new common equity using the retained earnings of the firm?

Select one:

1. 10.75%

b. 15.5%

C. 13.75%

d. 11.75%