1:Which of the following should NOT be considered when calculating a projects free cash flow? i. Depreciation ii. Investments that took place before the project iii. Alternative uses for assets that will be required in the project

Select one:

a.Only i

b.Only ii

c.ii and iii

d.All items should be considered

2:

A private equity firm is aiming to buy a company. Under private equity ownership, the company will earn an annual cash flow of $9mln. The estimated IRR is 19%. What is the investment outlay (in millions) closest to?

a.47.37

b.0.47

c.7.56

d.We do not have sufficient information to answer this question.

3:

There are two bonds. Bond A is a zero-coupon bond with a maturity of 20 years, the yield to maturity is 3%, and a face value of 1100. Bond B is a coupon-paying bond with a maturity of 15 years, a face value of $1200, and a yield to maturity of 4%. The coupon rate of this bond is 6%. The prices of both bonds are not provided. Consider the following two statements:

I. The zero-coupon bond has a higher duration than the coupon-paying bond

II. If the coupon rate of Bond B is higher than 6%, then all else equal (ceteris paribus), the duration of Bond B will be lower.

Select one:

a.Only statement I is correct

b.Only statement II is correct

c.Both statements are correct

d.Both statements are incorrect