1.How much new stock will be issued next year?

2.Risk free rate is 2%.Equity Risk Premium is 6%.Beta is 1.5.What is the equity cost of capital?

3.Debt/Equity is 0.45Risk free rate is 3%Beta is 2.0Equity Risk Premium is 7%Cost of debt before tax adjustment is 5.5%corporate tax rate is 40%What is the Weighted Average Cost of Capital (WACC)?

4.Debt/Equity is 2.75Risk free rate is 3.5%Beta is 4.25

Equity Risk Premium is 6.5%Cost of debt before tax adjustment is 6%corporate tax rate is 35%What is the Weighted Average Cost of Capital (WACC)?

Weight of debt= 2.75/3.75= 0.73Weight of equity= 1/3.75= 0.27WACC= 31.125% x 0.27+ 3.90% x 0.73= 11.25%

5.Debt/Equity is 2.0Risk free rate is 3.75%Beta is 3.0

Equity Risk Premium is 6%Cost of debt before tax adjustment is 7%corporate tax rate is 40%What is the Weighted Average Cost of Capital (WACC)?

6.Debt/Equity is 0.25Risk free rate is 3.75%Beta is 3.0

Equity Risk Premium is 7%Cost of debt before tax adjustment is 8%corporate tax rate is 38%What is the Weighted Average Cost of Capital

Assignment 3 - F301 DUE: APRIL 28 This assignment comprises your Final assignment for F301. Late assignments are not accepted. Please note that Late assignments Cannot be accepted! Submit your assignment via Canvas before April 28th to be SURE you receive credit. Good luck! This question applies to #1 and #2... You have $2,000 in non-cash current assets, $1,000 in cash, and $1,000 in current liabilities. You also have total assets of $3,000 and total liabilities of $4,550. Sales is $1,000, COGS is $100 and Net Income is $150. 1. What is the current ratio? Current ratio= 3.0 2. What is return on assets? Return on assets=0.05 or 50% Assignment 3 - F301 DUE: APRIL 28 These numbers apply to #3 and #4.... Next year, net income is expected to be $3,000. Capital Expenditures are expected to increase by $300. Depreciation is expected to be $285. Working capital is expected to increase by $40. Sales are $14,000. 3. What is cash flow from assets expected to be next year? Expected cash flow from assets = 2945 4. If the weighted average cost of capital is used as the discount rate and is 14%, and growth is expected to be steady beginning now through the foreseeable future at 4% (forever), then what is the value of this business opportunity? value of this business opportunity = $ 29450 Assignment 3 - F301 DUE: APRIL 28 5. A bond's coupon rate is equal to the annual interest divided by which one of the following? A. call price B. current price C. face value D. clean price E. dirty price 6. Which one of the following risk premiums compensates for the possibility of nonpayment by the bond issuer? A. default risk B. taxability C. liquidity D. inflation E. interest rate risk Assignment 3 - F301 DUE: APRIL 28 7. A project has an initial cost of $27,400 and a market value of $32,600. What is the difference between these two values called? A. net present value B. internal return C. payback value D. profitability index E. discounted payback 8. The length of time a firm must wait to recoup the money it has invested in a project is called the: A. internal return period. B. payback period. C. profitability period. D. discounted cash period. E. valuation period. Assignment 3 - F301 DUE: APRIL 28 9. The internal rate of return is defined as the: A. maximum rate of return a firm expects to earn on a project. B. rate of return a project will generate if the project in financed solely with internal funds. C. discount rate that equates the net cash inflows of a project to zero. D. discount rate which causes the net present value of a project to equal zero. E. discount rate that causes the profitability index for a project to equal zero. 10. The present value of an investment's future cash flows divided by the initial cost of the investment is called the: A. net present value. B. internal rate of return. C. average accounting return. D. profitability index. E. profile period. 11. Which one of the following methods determines the amount of the change a proposed project will have on the value of a firm? A. net present value B. discounted payback C. internal rate of return D. profitability index E. payback Assignment 3 - F301 DUE: APRIL 28 12. A project will produce cash inflows of $3,200 a year for 4 years with a final cash inflow of $5,700 in year 5. The project's initial cost is $9,500. What is the net present value of this project if the required rate of return is 16 percent? A. -$311.02 B. $2,168.02 C. $4,650.11 D. $9,188.98 E. $21,168.02 13. You are considering the following two mutually exclusive projects. The required rate of return is 14.6 percent for project A and 13.8 percent for project B. Which project should you accept and why? A. project A; because it has the higher required rate of return B. project A; because its NPV is about $4,900 more than the NPV of project B C. project B; because it has the largest total cash inflow D. project B; because it has the largest cash inflow in year one E. project B; because it has the lower required return Assignment 3 - F301 DUE: APRIL 28 14. You are considering two independent projects both of which have been assigned a discount rate of 15 percent. Based on the profitability index, what is your recommendation concerning these projects? A. You should accept both projects. B. You should reject both projects. C. You should accept project A and reject project B. D. You should accept project B and reject project A. E. You should accept project A and be indifferent to project B. Assignment 3 - F301 DUE: APRIL 28 15. It will cost $6,000 to acquire an ice cream cart. Cart sales are expected to be $3,600 a year for three years. After the three years, the cart is expected to be worthless as the expected life of the refrigeration unit is only three years. What is the payback period? A. 1.48 years B. 1.67 years C. 1.82 years D. 1.95 years E. 2.00 years