1-Marie Company is considering three independent projects, each of which requires a $3 million investment. The WACC is 8% The estimated internal rate of return (IRR) is presented below:

Project D IRR = 14%

Project E IRR = 12%

Project F IRR = 10%

2) The companys optimal capital structure calls for 50% debt and 50% equity. Net income is expected to be $6,000,000. If Marie establishes its dividends from the residual dividend model, what will be its payout ratio?

64%

48%

25%

52%

3) Which of the following is true?

Stock price is minimized when WACC is minimized

Stock price is maximized when EPS is maximized

Stock price is minimized when EPS is maximized

4) Firms Haley and Laura are identical except for their financial leverage ratios and interest rates they pay on debt. Each has $10 million in invested capital, has $4 million in EBIT, and is in the 50% federal-plus-state tax bracket. Haley, however, has a debt-to-capital ratio of 60% and pays 10% interest on its debt, whereas Laura has a 40% debt-to-capital ratio and pays 5% on its debt. Neither firm uses preferred stock in its capital structure. What is the ROE for each firm?

The ROE for Haley is 42.5% and the ROE for Laura is 31.7%

The ROE is 40% for each firm

The ROE for Haley is 24.5% and the ROE for Laura is 26.7%

The ROE is 20% for each firm