****Please answer the following question within 2 hours and 15 minutes. If you cannot answer in this time frame please, DO NOT take the case***

1) 2) 3) 4) 5) 6) 7) A company has determined that its optimal capital structure consists of 40 percent debt and 60 percent equity. Given the following information, calculate the firm's weighted average cost of capital. Cost of Debt = 6.6%, Tax rate = 40%, Current Stock Price = $24.93, Long Run Growth rate = 2.4%, Next Year's Dividend = $2.67. Show your answer to the nearest .1%. Do not use the % sign in your answer. Enter your answer as a whole number, thus 9.2% would be 9.2 rather than .092 or 9.2% You are considering the purchase of an investment that would pay you $78 per year for Years 1-4, $87 per year for Years 5-7, and $58 per year for Years 8-10. If you require a 14 percent rate of return, and the cash flows occur at the end of each year, then how much should you be willing to pay for this investment? Show your answer to the nearest $.01. Do not use the $ sign in your answer Virus Stopper Inc., a supplier of computer safeguard systems, uses a cost of capital of 12 percent to evaluate average-risk projects, and it adds or subtracts 1 percentage points to evaluate projects of more or less risk. Currently, two mutually exclusive projects are under consideration. Both have a cost of $ 349 and will last 4 years. Project A, a riskier-than-average project, will produce annual end of year cash flows of $ 75 . Project B, of less than average risk, will produce cash flows of $ 243 at the end of Years 3 and 4 only. To the nearest .01, list the NPV of the higher NPV project. Note, if the NPV is negative, place a - sign in front of your answer. Do not use the $ symbol You are offered an investment with returns of $ 1,588 in year 1, $ 4,282 in year 2, and $ 5,506 in year 3. The investment will cost you $ 7,887 today. If the appropriate Cost of Capital (quoted interest rate) is 12.2 %, what is the Profitability Index of the investment? Enter your answer to the nearest . 01. Do not use the $ sign or commas in your answer. If the NPV is negative, use the - sign A firm has the following book-value balance sheet; Debt =$ 17 ,000, Common Stock ($1 par)= 8 and Retained Earnings = $ 27 ,000. The book value of assets is the total of Debt, Common Stock and Retained Earnings. The firm's bonds are currently selling at par and the firm's stock is currently selling for $ 24 . The firm's tax rate is 32 %. What is the value of the firm's tax shield (i.e. the change in firm value due to the use of leverage in the capital structure)? Show your answer to the nearest $1. Do not use commas or the $ sign in your answer Which is the amount that should be paid for a stock that will pay a dividend of $4.94 in one year and $5.37 in two years? After that, the stock price will grow at a constant 5% per year forever. The appropriate discount rate is 12%. Show your answer to the nearest $.01. Do not use the $ sign in your answer Mills Mining is considering an expansion project. The proposed project has the following features. The project has an initial cost of $702--this is also the amount which can be depreciated using the following depreciation schedule: Year 1 is 33%, Year 2 is 45%, Year 3 is 15%, and Year 4 is 7%. If the project is undertaken, at t = 0 the company will need to increase its inventories by $111, and its accounts payable will rise by $42. This net operating working capital will be recovered at the end of the projects life (t = 4). If the project is undertaken, the company will realize an additional $570 in sales over each of the next four years (t = 1, 2, 3, 4). The company's operating cost (not including depreciation) will equal $325 a year. The company's tax rate is 40 percent. At t = 4, the projects economic life is complete, but it will have a salvage value of $231. The projects WACC = 10 percent. What are the one-time cash flows associated with ending the project (i.e. terminal Cash Flows)? Note, we only want terminal cash flows, not operating cash flows in the last year. Show your answer to the nearest $.01. Do not use the $ or , sign in your answer 8) Edward's Manufactured Homes is considering replacing some machines. Edward's purchased the current machinery 2 years ago for $320. The company is considering replacing this machinery today with newer machines that utilize the latest in technology. The new machines will cost $400, plus an additional $15 for installation. We will shut down production in 4 years. The old machines can be sold for $140 to a foreign firm for use in its production facility in South America. Both machines are classified as 5-year property for MACRS. The old machines will have expected salvage value of $0 in four years. 9) Annual sales, due to the new machine's increased production, will increase from $1500 to $1520. The new machines are more efficient and should lower net annual variable operating costs by $35. Annual Fixed costs will remain the same at $700. Over the past two years, Edward's has spent $13 testing the various available machines. In 4 years, we estimate that the value of the new machines to be $125. We currently have $75 in working capital invested in the project, which is not expected to change if we buy the new machine. The firm's tax rate is 35%. The cost of capital is 12%. a. (3 points) What are the initial cash flows in year 0? b. (4 points) What are the operating cash flows in year 2? c. (3 points) What are the terminal cash flows in year 4? Show the inputs