A firm considers a project with the following cash flows: time-zero = +20,000, years 1-5 = -4,500. Should the project be accepted if the cost of capital is 10 percent?

Question 72 options:

Yes, the IRR of the project is 4.06 percent..

Yes, the IRR of the project is 12.5 percent.

No, the IRR of the project is 12.5 percent.

No, the IRR of the project is 4.06 percent.

A project requires an initial investment of $2,000.If the cash flows are $1,000 in year 1, $2,000 in year 2, and $3,000 in year 3, what is the discounted payback period if the opportunity cost of capital is 10%?

Question 73 options:

1.50 years

1.66 years

2.50 years

2.66 years

Mitra Corp. is currently all equity financed and has a value of $70 million.Investors currently require a return of 15.5% on common stock.Mitra pays no taxes.Mitra plans to issue $20 million of debt with a return of 8 percent and use the proceeds to repurchase common stock.What will be the expected return on the common stock after the proposed debt issue?

Question 78 options:

13.63%

17.00%

17.38%

18.00%

A firm has a debt/equity ratio of . The debt pays a 6% rate of interest. The expected rate of return on equity is 12%. What would happen to the expected rate of return if the firm reduced its debt/equity ratio to 1/3?Ignore taxes.

Question 79 options:

rate of return would decrease to 10.60%

rate of return would increase to 12.50%

rate of return would decrease to 8.33%

rate of return would increase to 11.33%