Chapter 8 problems 6, 14, and 28

6.) You have been offered a unique investment opportunity.If you invest $10,000 today, you will receive $500 one year from now, $1,500 two years from now, and $10,000 ten years from now.

a.)What is the NPV of the opportunity if the cost of capital is 6% per year?Should you take the opportunity?

b.)What is the NPV of the opportunity if the cost of capital is 2% per year?Should you take it now?

14.) You are a real estate agent thinking of placing a sign advertising your services at a local bus stop.The sign will cost $5,000 and will be posted for one year.You expect that it will generate additional free cash flow of $500 per month.What is the payback period?

28.) You are choosing between two projects, but can only take one.The cash flows for the projects are given in the following table.

012 34

A-$5025202015

B-$10020405060

Chapter 12 problems 1 & 34

1.) You buy 100 shares of Tidepool Co.for $40 each and 200 shares of Madfish, Inc, for $15 each.What are the weights in your portforlio?

34.) You are analyzing a stock that has a beta of 1.2.The risk-free rate is 5% and you estimate the market risk premium to be 6%.If you expect the stock to have a return of 11% over the next year, should you buy it? Why or why not?