1. You run a construction firm. You have just won a contract to build a government office complex. Building it will require an investment of $ 10.3 million today and $ 4.6 million in one year. The government will pay you $ 20.6 million in one year upon the building's completion. Suppose the interest rate is 10.9 %. a. What is the NPV of this opportunity? b. How can your firm turn this NPV into cash today?

2.You are preparing to produce some goods for sale. You will sell them in one year and you will incur costs of $ 77 comma 000 immediately. If your cost of capital is 7.3 %, what is the minimum dollar amount you need to sell the goods for in order for this to be a non-negative NPV?

6.Marian Plunket owns her own business and is considering an investment. If she undertakes the investment, it will pay $ 5 comma 040 at the end of each of the next 3 years. The opportunity requires an initial investment of $ 1260 plus an additional investment at the end of the second year of $ 6300. What is the NPV of this opportunity if the interest rate is 1.5 % per year? Should Marian take it?

7.Bill Clinton reportedly was paid $ 15.0 million to write his book My Life. The book took three years to write. In the time he spent writing, Clinton could have been paid to make speeches. Given his popularity, assume that he could earn $ 8.8 million per year (paid at the end of the year) speaking instead of writing. Assume his cost of capital is 10.2 % per year. a. What is the NPV of agreeing to write the book (ignoring any royalty payments)? b. Assume that, once the book is finished, it is expected to generate royalties of $ 4.7 million in the first year (paid at the end of the year) and these royalties are expected to decrease at a rate of 30 % per year in perpetuity. What is the NPV of the book with the royalty payments?

8. FastTrack Bikes, Inc. is thinking of developing a new composite road bike. Development will take six years and the cost is $ 212,900 per year. Once in production, the bike is expected to make $ 296,441 per year for 10 years. The cash inflows begin at the end of year 7. For parts a-c, assume the cost of capital is 9.2 %. a. Calculate the NPV of this investment opportunity. Should the company make the investment? b. Calculate the IRR and use it to determine the maximum deviation allowable in the cost of capital estimate to leave the decision unchanged. c. How long must development last to change the decision? For parts d-f, assume the cost of capital is 13.5 %. d. Calculate the NPV of this investment opportunity. Should the company make the investment? e. How much must this cost of capital estimate deviate to change the decision? f. How long must development last to change the decision?

9.You have been offered a unique investment opportunity. If you invest $ 11,400 today, you will receive $ 570 one year from now, $ 1710 two years from now, and $ 11400 ten years from now. a. What is the NPV of the opportunity if the cost of capital is 6.6 % per year? Should you take the opportunity? b. What is the NPV of the opportunity if the cost of capital is 2.6 % per year? Should you take it now?