1. (Chapter 8, NPV) You might purchase an office building. You have tenants that will generate $25,000 per year in cash flows for 3 years. At the end of 3 years, you can sell the building for $450,000. If the building is being offered for sale at a price of $400,000, with an opportunity cost of capital of 7%, what is your NPV?

A) 432,942

B) 57,942

C) 32,942

D) 60,000

2. (Chapter 8, IRR)Suppose a project has initial investment $50,000, after that investor will receive $4,500 for 3 years. After year 3, investor can sell this contract for $48,000. Based on that information, what is the IRR for this project?

1. 7.76%
2. 8.84%
3. 6.25%
4. 3.5%

3. (Chapter 11, Expected Return) A stock has a 40% probability of generating a 10% return, a 30% probability of generating a 20% return, and a 30% probability of generating a -15% return. What is the expected return of this stock?

1. 10.8%
2. -5%
3. 5%
4. 4%

4. (Chapter 12, CAPM) Assume the risk-free rate is 2%, the expected return on the market portfolio is 8%, and stock has a Beta of 1.2. What is the expected return on the stock using the Capital Asset Pricing Model (CAPM)?

1. 9.2%
2. 8%
3. 2%
4. 10%

5. (Chapter 13, WACC) Geothermal Inc. has the following capital structure: 40% of assets in debt and 60% of assets in equity. Given that Geothermal pays 6% for debt and 8% for equity, what is the companys cost of capital (suppose the company tax rate is 21%)?

A) about 3.2%

B) about 4.8%

C) about 5.5%

D) about 6.7%