1. Suppose you have the opportunity to invest in an online marketing project that you expect to generate $5000 in cash flow at the end of each of the next 5 years. The project requires an investment of $10,000 right now and an additional $10,000 at the end of the first year. What is the net present value (NPV) of this investment if the discount rate is 4%?

a. $2643.73

b. -$112.23

c. -$1410.67

d. $1248.56

2.In business valuation, our estimate of a company's value depends partly on the discount rate (k) that is used to discount future cash flows - an observation that is apparent in the Shuksan Genome One way in which k is important is that it is an input in the constant growth model used to compute terminal value, since terminal value = next year's free cash flow divided by (k - g).Which of the following is the most accurate statement about the overall impact of k on the company's current value in the Shuksan Genome?

a. An increase in k by 1 percentage point has a larger impact on Shuksan's current value than a 1 percentage point decrease in g.

b. An increase in k by 1 percentage point has the same impact on Shuksan's current value as a 1 percentage point decrease in g.

c. An increase in k by 1 percentage point has a smaller impact on Shuksan's current value than a 1 percentage point decrease in g.

d. The impact on Shuksan's current value of an increase in k by 1 percentage point cannot be determined.

3.Consider a set of firms that have lost money in the past and that have net operating losses (NOLs) that can be used to decrease their taxable income in future years. Given just this information about these firms, which of the following is the best advice you could provide about their current financing choices?

a.These firms should not have much debt because the benefits of the debt tax shield are likely to be small.

b.These firms should not have much debt because they are likely to go bankrupt.

c. These firms should have a lot of debt because they could use the additional tax shield.

d. These firms should have a lot of debt because they have positive NPV projects to fund.

4.Esterline's asset beta is 0.78 and the asset beta for the Avionics and Controls division is 1.40.Say that the Avionics and Controls division represents 1/3 of the firm's assets.What is the value of asset beta for the other two divisions combined?

a.0.74

b.0.78

d.0.47

c.0.43