1. The Matterhorn Corporation is trying to choose between the following two mutually exclusive design projects:

Year	Cash Flow (I)	Cash Flow (II)
0	$65,000	$24,000
1	24,000	8,000
2	29,000	14,500
3	36,000	12,800

Requirement 1:
(a)	If the required return is 11 percent, what is the profitability index for each project? (Do not round intermediate calculations. Round your answers to 3 decimal places (e.g., 32.161).)

	Profitability index
Project I
Project II

(b)	If the required return is 11 percent and the company applies the profitability index decision rule, which project should the firm accept?
	(Click to select)Project IIProject I

Requirement 2:
(a)	If the required return is 11 percent, what is the NPV for each project? (Do not round intermediate calculations. Round your answers to 2 decimal places (e.g., 32.16).)

	Net present value
Project I	$
Project II	$

(b)	If the company applies the NPV decision rule, which project should it take?
	(Click to select)Project IIProject I

1. Global Toys Inc., imposes a payback cutoff of three years for its international investment projects. Assume the company has the following two projects available.

Year	Cash Flow (A)		Cash Flow (B)
0	$	55,000	$	95,000
1		19,000		18,000
2		27,000		26,000
3		24,000		28,000
4		9,000		260,000

Requirement 1:

What is the payback period for each project? (Do not round intermediate calculations. Round your answers to 2 decimal places (e.g., 32.16).)

	Payback period
Project A	years
Project B	years

Requirement 2:

Should it accept either of them?

(Click to select)Accept both projects A and BAccept project B and reject project AReject both projects A and BAccept project A and reject project B

1. Metallica Bearings, Inc., is a young start-up company. No dividends will be paid on the stock over the next nine years, because the firm needs to plow back its earnings to fuel growth. The company will then pay a dividend of $15 per share 10 years from today and will increase the dividend by 5 percent per year thereafter.

Required:

If the required return on this stock is 14 percent, what is the current share price? (Do not round intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).)

Current share price	$

1. TwitterMe, Inc., is a new company and currently has negative earnings. The companys sales are $1,200,000 and there are 130,000 shares outstanding.

Requirement 1:

If the benchmark price-sales ratio for the company is 5.2, how much will you pay for the stock? (Do not round intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).)

Current stock price

$

Requirement 2:

If the benchmark price-sales ratio for the company is 4.6, how much will you pay for the stock? (Do not round intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).)

Current stock price

$

1. Raffalovich, Inc., is expected to maintain a constant 4.9 percent growth rate in its dividends, indefinitely.

Required:

If the company has a dividend yield of 5.7 percent, what is the required return on the companys stock? (Do not round intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).)

Required return

%