en cash flows are non-conventional 41. The internal rate of retum (IRR) is defined as which of the follow AJRR may produce multiple rates of return when cash flows are non B) IRR is best used for comparing mutually exclusive projects C) IRR is almost not used in the business world anymore D) IRR is mainly used to evaluate small projects 42. Calculate the net present value (NPV) of the to we het present value (NPV) of the following project, which has an initial cash outflow - $34,900. The required return - 15.35%. Year Cash Inflows i $12,500 19,700 10,400 A) -$3,383.25 B) -$2,785.61 C) -$2,280.52 D) S54,171.38 E) $62,419.15 Questions 43-47: Wal-Mart plans to open a new store near JU. Wal-Mart is going to finance via bond market and stock market. Total capital required is 10 million dollars. 4 million dollars are going to be borrowed from the bond market. This 4% annual coupon bond is traded in the market for $1050 and is going to be matured in 8 years. There is no flotation fee. Tax rate is 40%. Wal-Mart plans to pay dividend of S2 per share next year. The dividend is expected to grow at the rate of 6% each year. The stock is traded at $120 per share. The flotation fee is 5%. 43. What is the percentage of capital financed from the bond market (weight of debt)? A) 100% B) 60% C) 40% D) 30% 44. How much is the after tax cost of debt of Wal-Mart? A) 2.13% B) 1.65% C) 2.38% D) 1.97% 45. How much is the cost of equity (stock)? The flotation fee is 5% a. 8.91% b. 7.75% c. 7.82% d. 8.46% 46. How much is the WACC? a. 5.44% b. 3.98% c. 4.11% d. 4.49% 47. Wal-Mart new store near JU is expected to generate cash profits as follows Year 0: -10 millions (initial outlay) Year 1: 1 million Year 2: 2 million Year 3: 3 million Year 4: 3 million Year 5: 3 million Year 6: 3 million Year 7: 3 million Year 8: 3 million The store will be closed by the end of the fifth year with no salvage value, Assume the cost of capital (WACC) is 6%. Based on the above information, how much is NPV? a. 6.11 millions b. 5.52 millions c. 5.61 millions d. 5.85 millions 48. A zero coupon bond has no value in it since there is no coupon payment. Investors sho avoid this type of bond.. a. True b. False