1. Suppose the WACC for Ajax Inc. is 14%. The company is considering a project that costs $100,000 right now and returns $45,000 annually for three years? What is the project's NPV?

a.$4,473.44

b.$3,397.5

c.$35,000.00

d.$16,100.00

2. Consider the treatment of the overhead allocation when you evaluate a project. Which of the following statements represents best practice?

a. Overhead should be included in the analysis because it represents costs that would have been incurred anyway.

b. Overhead should be included in the analysis because it is mandated by the corporate manual.

c. Overhead should not be included because it represents costs that are likely to increase if the plant renovations are initiated.

d. Overhead should not be included if it represents costs that are not incremental to the plant renovations.

3. Value Line is an investment research firm that provides estimates of the fundamental value of various companies' stocks. Suppose that Value Line projects that Valorous Corporation will pay a dividend of $1.80 per share at the end of this year and a dividend of $2.40 per share at the end of the following year. Value Line also projects that the price of Valorous' stock will be $44 per share after two years. If Valorous has an equity cost of capital of 8%, what is Value Line's estimate of the current fundamental value of one share of Valorous stock?

a.$42.40

b. $41.45

c. $39.27

d. $40.22