1. Virus Stopper Inc., a supplier of computer safeguard systems, uses a cost of capital of 11 percent to evaluate average-risk projects, and it adds or subtracts 3 percentage points to evaluate projects of more or less risk. Currently, two mutually exclusive projects are under consideration. Both have a cost of $ 331 and will last 4 years. Project A, a riskier-than-average project, will produce annual end of year cash flows of $ 95 . Project B, of less than average risk, will produce cash flows of $ 265 at the end of Years 3 and 4 only. To the nearest .01, list the NPV of the higher NPV project. Note, if the NPV is negative, place a - sign in front of your answer.

4. Consider a typical firm that uses both debt and equity in its capital structure. For this typical firm with a given capital structure, which of the following is correct? (Note: All rates are after taxes.)

Question 4 options:

kd > ks > WACC.

ks > kd > WACC.

WACC > ks > kd.

ks > WACC > kd.

None of the statements above is correct.

5. For a typical firm, which of the following sequences is CORRECT? All rates are after taxes, and assume that the firm operates at its target capital structure.

Question 5 options:

	re > rs > WACC > rd.
	WACC > re > rs > rd.
	rd > re > rs > WACC.
	WACC > rd > rs > re.