Dundee Co. is considering Project X whose cash flows are shown below: Year 0 1 2 3 CF -$1,200 $600 $550 $300 The companys capital structure is distributed equally between debt, preferred stock and common stock. It has also the following information: 1- After tax cost of debt: 2% 2- Preferred stocks are selling at $120 per share and pay a dividend of $5 per share 3- Common stocks are selling at $40 per share, pay a year-end dividend of $2 per share and grow at a constant rate of 10%. The company is also considering another two projects Y & Z with the following information: Project Y Z NPV $96.00 $281.9 MIRR 6.26% 9.24% IRR 12.41% 10.98% Payback Period 1.44 years 2.33 Year Note: This problem is related to Questions 1 to 9

1. NPV of project X is: *

A. $86

B. $250

C. $600

D. $-1,200

E. None of the above

2. MIRR of project X is: *

A. 11.00%

B. 9.5%

C. 8.88%

D. 15.64%

E. None of the above

3. The Pay-Back Period of X is: *

A. 1.93 years

B. 2.17 years

C. 2.06 years

D. 3.00 years

E. None of the above

4. The Discounted Pay-Back Period of project X is: *

A. 2.06 years

B. 1.639 years

C. 2.65 years

D. 3.00 years

E. None of the above

5. Assuming that the three projects X, Y & Z are independent, which project (s) should the company choose: *

A. X, Y & Z

B. X & Z

C. Only X

D. Only Y

E. Reject all projects

6. Assuming that the three projects X, Y & Z are Mutual Exclusive, which project (s) should the company choose: *

A. X, Y & Z

B. X & Z

C. Only X

D. Only Z

E. Reject all projects

7. Assuming that the three projects X, Y & Z are independent, then based on MIRR which project (s) should the company choose: *

A. X, Y & Z

B. X & Z

C. Only X

D. Only Z

E. Reject all projects

8. Assuming that the three projects X, Y & Z are Mutual Exclusive, then based on MIRR which project (s) should the company choose: *

A. X, Y & Z

B. X & Y

C. Only X

D. Only Z

E. Reject all projects

9. If IRR for X is 11.00%, and the three project X, Y & Z are Independent, which project (s) should the company choose: *

A. X, Y & Z

B. X & Y

C. Only X

D. Only Y

E. Reject all projects

10. Wilson Co. is considering two mutually exclusive projects. Both require an initial investment of $10,000 at t = 0. Project X has an expected life of 2 years with after-tax cash inflows of $6,000 and $8,500 at the end of Years 1 and 2, respectively. Project Y has an expected life of 4 years with after-tax cash inflows of $4,600 at the end of each of the next 4 years. Each project has a WACC of 11%. What is the equivalent annual annuity of the most profitable project? *

A. $1,345.50

B. $1,346.30

C. $1,361.52

D. $1,376.74

E. $1,411.15