1.

You are evaluating two projects with the following cash flows:

Year	Project X			Project Y
0	$540,600			$511,000
1	219,700			209,400
2	229,600			219,200
3	236,800			227,100
4	196,500			187,900

What is the crossover rate for these two projects?

Multiple Choice

• 12.42%

• 13.67%

• .60%

• 23.29%

• 23.89%

2.

You want to create a portfolio equally as risky as the market, and you have $1,400,000 to invest. Consider the following information:

Asset	Investment	Beta
Stock A	$350,000	0.75
Stock B	$490,000	1.15
Stock C		1.50
Risk-free asset

What is the investment in Stock C?

What is the investment in risk-free asset?

3. Charlotte's Crochet Shoppe has 11,900 shares of common stock outstanding at a price per share of $67 and a rate of return of 11.29 percent. The company also has 360 bonds outstanding, with a par value of $1,000 per bond. The pretax cost of debt is 5.97 percent and the bonds sell for 94.8 percent of par. What is the firm's WACC if the tax rate is 35 percent?

Multiple Choice

• 9.07%

• 8.59%

• 8.76%

• 10.12%

• 9.70%