Glasgow company has the following financial data for project X (3-year project): Year 0 Year 1 Year 2 Year 3 CF -10,000 5,000 4,000 4,000 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: 5.8%. Tax rate: 40% 2- Preferred stocks are selling at $65 per share and pay a dividend of $8 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 13%. The company is also considering another two projects Y & Z with the following information: Criterion Project Y Project Z Payback Period 2.56 years 3 years NPV $678.98 $282.24 IRR 15.19% 16% MIRR 14.48% 15% Note: This problem is related to questions 1 to 9

1. The NPV for project X is: *

A. $500.18

B. -$500.18

C. $3,000

D. -$3,000

E. None of the above

2. The MIRR for project X is: *

A. 12.38%

B. 13.38%

C. 31.38%

D. 13.83%

E. None of the above

3. The payback period for project X is: *

A. 2.00 years

B. 2.52 years

C. 2.25 years

D. -2.25 years

E. None of the above

4. The discounted payback period for project X is: *

A. 2.25 years

B. 2.28 years

C. 2.28 months

D. 2.82 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 Y

E. Reject all projects

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

A. X, Y & Z

B. X & Y

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 criteria 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 15.02%, and the three projects X, Y & Z are Independent, based on IRR criteria 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. Belanger Construction is considering the following project. The project has an up-front cost and will also generate the following subsequent cash flows. The projects payback is 1.5 years, and it has a weighted average cost of capital of 10 percent. What is the projects modified internal rate of return (MIRR)? *

A. 10.00%

B. 19.65%

C. 21.54%

D. 23.82%

E. 14.75%