Question 1

Assume that you require an annual return of 6%. What is the net present value (NPV) of a project that earns $7 million in Yr 1, $12 million in Yr 2 and $7 million in Yr 3, if it requires an initial investment of $30 million?

a) - 5.47 million dollars

b) + 6.84 million dollars

c) - 6.84 million dollars

d) + 56.00 million dollars

Question 2

The risk-free interest is 1.1 percent and the overall stock market earns 4.5 percent of return at the moment. If the cost of equity of Griffith Ltd. is 6.3 percent, what is the beta of the company if we apply the notion of the capital asset pricing theory?

a) 1.16

b) 1.22

c) 1.53

d) None of the above

Question 3

When a firm is exposed to translation exposure, a perfect hedge (full coverage) can usually be achieved when:

a) using a money market hedge

b) using an option hedge

c) using a futures hedge

d) a perfect hedge is nearly impossible, and therefore, none of these are correct