$1.$ You have invested $$4,500$ in an account that earns $8\%$ compounded semi$-$annually.

You plan on making additional payments of $$75$ per month into this account for the

next five years. How much will your investment be worth in $5$ years? $($Answer: b$)$

a$.$ $$11,344$

b$.$ $$12,153$

c$.$ $$12,654$

d$.$ $$13,321$

e$.$$$13,538$

$2.$ You plan on buying a bottling machine for $$2$ million, which can be salvaged for

$$400,000$ in $8$ years. Your tax rate is $43\%$ and the CCA rate is $30\%.$ Your cost of

capital is $13\%.$ What is present value of the CCA tax sheild? $($Answer: e$)$

a$.$ $$338,447$

b$.$ $$378,521$

c$.$ $$422,781$

d$.$$$458,402$

e$.$ $$520,3485.$ Your firm is financed by $40\%$ equity and $60\%$ debt. The cost of equity is$16\%$ and the

cost of debt is $7\%.$ Your corporate tax rate is $37\%.$ What is your weighted average

cost of capital $($WACC$)?($Answer: d$)$

a$.7\mathrm{.}77\%$

b$.8\mathrm{.}09\%$

c$.8\mathrm{.}78\%$

d$.9\mathrm{.}05\%$

e$.9\mathrm{.}58\%$

$6.$ You need to finance a project that will cost $$17$ million. The floatation costs on

raising the funds are $6\%.$ How much money do you need to rise to be able to afford

the project? $($Answer: e$)$

a$.$ $$15,980,000$

b$.$ $$16,827,203$

c$.$ $$17,000,000$

d$.$ $$17,308,221$

e$.$ $$18,085,10612.$ Mr$.$ Van Driesen is trying to decide whether or not to buy or lease a computerized

grading system for his class. He can buy it for $$12,000$ or lease it for $$1800$ per year

for the next five years. He can get the funds for the lease, by borrowing at $8\%$ from

the schools line of credit. The grader has no salvage value and fits into the $25\%$ CCA

bracket. The tax rate is $33\%.$ What is the NAL? $($Answer: c$)$

a$.$ $$2,898\mathrm{.}4$

b$.$ $$3,164\mathrm{.}5$

c$.$ $$3,375\mathrm{.}18$

d$.$ $$3,554\mathrm{.}3$

e$.$ $$3,841\mathrm{.}217.$ You are looking buying a nuclear reactor which has a fair market value of

$$13,754,655.$ Alternately, you can lease it for the next ten years. Your after tax cost of

debt is $7\mathrm{.}5\%.$ Your tax rate is $35\%.$ What would the minimum pre$-$tax lease payment

have to be for it to qualify as a capital lease? $($Answer: c$)$

a$.$ $$1,022,374\mathrm{.}66$

b$.$ $$1,677,649\mathrm{.}96$

c$.$ $$2,774,574\mathrm{.}93$

d$.$ $$3,451,882\mathrm{.}01$

e$.$ $$3,992,525\mathrm{.}3729.$ Gribble Bug Exterminators are financed by pure equity and expect EBIT to be

$$22,000$ perpetually, and have a cost of equity of $13\%,$ with a tax rate of $35\%.$

Assume that M&M Proposition $1$ & $2$ hold and there are no bankruptcy costs. What is

the value of the firm under the optimal capital structure? $($Answer: e$)$

a$.$ $$120,500$

b$.$$$129,250$

c$.$ $$132,750$

d$.$ $$139,750$

e$.$ $$148,500$

$30.$ Burns Nuclear Plant is facing bankruptcy and can be liquidated for $$40$ million. If

Burns can restructure and sell off any unprofitable divisions they can manage to

reduce the riskiness of future cash flows and bring their WACC to $11\mathrm{.}5\%.$ Burns has

a tax rate of $33\%.$ What would the minimum perpetual pre$-$tax operating cash flows

have to be for restructuring to be viable? $($Answer: c$)$

a$.$ $$4,600,000\mathrm{.}00$

b$.$ $$5,665,384\mathrm{.}22$

c$.$ $$6,865,671\mathrm{.}64$

d$.$ $$7,332,107\mathrm{.}54$

e$.$$$7,869,475\mathrm{.}31$