Question 2 1 pts A replacement computer will cost you $3,500, but save you $750 each year because of the faster processor. What is the payback period of the computer?
Flag this Question Question 3 1 pts A new transmission in your truck will cost $7,500. Luckily, it should reduce maintenance expense by $3,525 each year for the next 10 years. What is the profitability index of the transmission? Use a discount rate of 12.3%.
Flag this Question Question 4 1 pts A new security system has a price-tag of $7,500, but should save your company $3,275 each year for the next 10 years in reduced thefts. What is the IRR of the security system?
Flag this Question Question 5 1 pts
Given the following cash flows for two mutually exclusive projects, and a required rate of return of 12%, what is the EAA for Project B?
| Year | Project A | Project B |
| 0 | -300,000 | -300,000 |
| 1 | 150,000 | 70,000 |
| 2 | 150,000 | 70,000 |
| 3 | 80,000 | 120,000 |
| 4 | 80,000 | 120,000 |
| 5 | | 120,000 |
| 6 | | 60,000 |
Flag this Question Question 6 1 pts SanData Inc. recently paid its annual dividend of $3. Dividends have consistently grown at a rate of 3%. You estimate that the stock has a required return of 17%. What is the intrinsic value of this stock?
Flag this Question Question 7 1 pts DJ Industries has outstanding $70 par value preferred stock that pays a 7.75% dividend rate per year. You estimate that the stock has a required discount rate of 18%. What is the intrinsic value of this preferred stock?
Flag this Question Question 8 1 pts Driver Products recently paid its annual dividend of $2, and reported an ROE of 15%. The firm pays out 50% of its earnings as dividends. The stock has a beta of 1.44. The current risk-free rate is 2.5% and the market return is 11%. Assuming that CAPM holds, what is the intrinsic value of this stock?
Flag this Question Question 9 1 pts Sparrow Products Industries stock is currently selling for $80. It just paid its annual dividend of $2 after reporting an ROE of 15%. The firm pays out 50% of its earnings as dividends. What is the expected return of this stock?
Flag this Question Question 10 1 pts Broden, Inc. recently issued $70 par value preferred stock that pays an annual dividend of $19. If the stock is currently selling for $50, what is the expected return of this preferred stock?
Flag this Question Question 11 1 pts Crossroad Corporation is trying to decide whether to invest to automate a production line. If the project is accepted, labor costs will decrease by $165,000 per year. However, other cash operating expenses will increase by $86,000 per year. The equipment will cost $260,000 and is depreciable over 10 years using simplified straight line to a zero salvage value. Crossroad will invest $10,000 in net working capital at installation. The firm has a marginal tax rate of 34%. Calculate the firm's annual cash flows associated with the new project.
Flag this Question Question 12 1 pts Eastern Corporation has $21,000,000 in equipment that has a 15 year class life. The equipment is 8 years old. Eastern is selling the equipment for $10,000,000. Eastern uses simplified straight line depreciation (zero salvage value) and has a marginal tax rate of 34%. What is the terminal cash flow? Assume no working capital.
Flag this Question Question 13 1 pts Riverview Company is evaluating the proposed acquisition of a new production machine. The machine's base price is $200,000, and installation costs would amount to $28,000. Also, $10,000 in net working capital would be required at installation. The machine will be depreciated for 3 years using simplified straight line depreciation. The machine would save the firm $110,000 per year in operating costs. The firm is planning to keep the machine in place for 2 years. At the end of the second year, the machine will be sold for $50,000. Riverview has a cost of capital of 12% and a marginal tax rate of 34%. What is the NPV of the project?
Flag this Question Question 14 1 pts Riverview Company is evaluating the proposed acquisition of a new production machine. The machine's base price is $200,000, and installation costs would amount to $28,000. Also, $10,000 in net working capital would be required at installation. The machine will be depreciated for 3 years using simplified straight line depreciation. The machine would save the firm $110,000 per year in operating costs. The firm is planning to keep the machine in place for 5 years. At the end of the fifth year, the machine will be sold for $20,000. Riverview has a cost of capital of 12% and a marginal tax rate of 34%. What is the IRR of the project?
Flag this Question Question 15 1 pts Riverview Company is evaluating the proposed acquisition of a new production machine. The machine's base price is $200,000, and installation costs would amount to $28,000. Also, $10,000 in net working capital would be required at installation. The machine will be depreciated for 3 years using simplified straight line depreciation. The machine would save the firm $110,000 per year in operating costs. The firm is planning to keep the machine in place for 2 years. At the end of the second year, the machine will be sold for $100,000. Riverview has a cost of capital of 12% and a marginal tax rate of 34%. What is the NPV of the project?
Flag this Question Question 16 1 pts
Southern Corporation has a capital structure of 40% debt and 60% common equity. This capital structure is expected not to change. The firm's tax rate is 34%. The firm can issue the following securities to finance capital investments:
Debt: Capital can be raised through bank loans at a pretax cost of 8.5%. Also, bonds can be issued at a pretax cost of 10%.
Common Stock: Retained earnings will be available for investment. In addition, new common stock can be issued at the market price of $59. Flotation costs will be $3 per share. The recent common stock dividend was $3.15. Dividends are expected to grow at 7% in the future.
What is the cost of capital if the firm uses bonds and issues new common stock?
Flag this Question Question 17 1 pts
Bay Beach Industries wants to maintain their capital structure of 40% debt and 60% equity. The firm's tax rate is 34%. The firm can issue the following securities to finance the investments:
Bonds: Mortgage bonds can be issued at a pre-tax cost of 9 percent. Debentures can be issued at a pre-tax cost of 10.5 percent.
Common Equity: Some retained earnings will be available for investment. In addition, new common stock can be issued at the market price of $46. Flotation costs will be $3 per share. The recent common stock dividend was $3.60. Dividends are expected to grow at 6% in the future.
What is the cost of capital using mortgage bonds and internal equity?
Flag this Question Question 18 1 pts A firm has preferred stock that pays an 8 percent dividend on a $75 par value. If a new issue is offered, flotation costs will be 3 percent of the current market price of $80. The firm's marginal tax rate is 35 percent. What is the firm's cost of preferred stock financing?
Flag this Question Question 19 1 pts Hampton Corporation has a beta of 1.6 and a marginal tax rate of 34%. The expected return on the market is 11% and the risk-free interest rate is 6%. Estimate the firm?s cost of internal equity.
Flag this Question Question 20 1 pts St. Thomas Company is planning to issue $1,000 par value bonds. The bonds will have a coupon rate of 9.5 percent and will be sold at a market price of $980. Flotation costs will amount to 4 percent of market value. The bonds will mature in 15 years and coupon payments will be semi-annual. St. Thomas' marginal tax rate is 35%. What is the firm's cost of debt financing?
Question 11 pts You have purchased a canning machine for $5,000. You expect the machine to save your company $3,325 each year for the next 10 years. What is the NPV of the machine? Use a discount rate of 10.8%.
Flag this Question Question 21 pts A replacement computer will cost you $3,500, but save you $750 each year because of the faster processor. What is the payback period of the computer?
Flag this Question Question 31 pts A new transmission in your truck will cost $7,500. Luckily, it should reduce maintenance expense by $3,525 each year for the next 10 years. What is the profitability index of the transmission? Use a discount rate of 12.3%.
Flag this Question Question 41 pts A new security system has a price-tag of $7,500, but should save your company $3,275 each year for the next 10 years in reduced thefts. What is the IRR of the security system?
Flag this Question Question 51 pts
Given the following cash flows for two mutually exclusive projects, and a required rate of return of 12%, what is the EAA for Project B?
| Year | Project A | Project B |
| 0 | -300,000 | -300,000 |
| 1 | 150,000 | 70,000 |
| 2 | 150,000 | 70,000 |
| 3 | 80,000 | 120,000 |
| 4 | 80,000 | 120,000 |
| 5 | | 120,000 |
| 6 | | 60,000 |
Flag this Question Question 61 pts SanData Inc. recently paid its annual dividend of $3. Dividends have consistently grown at a rate of 3%. You estimate that the stock has a required return of 17%. What is the intrinsic value of this stock?
Flag this Question Question 71 pts DJ Industries has outstanding $70 par value preferred stock that pays a 7.75% dividend rate per year. You estimate that the stock has a required discount rate of 18%. What is the intrinsic value of this preferred stock?
Flag this Question Question 81 pts Driver Products recently paid its annual dividend of $2, and reported an ROE of 15%. The firm pays out 50% of its earnings as dividends. The stock has a beta of 1.44. The current risk-free rate is 2.5% and the market return is 11%. Assuming that CAPM holds, what is the intrinsic value of this stock?
Flag this Question Question 91 pts Sparrow Products Industries stock is currently selling for $80. It just paid its annual dividend of $2 after reporting an ROE of 15%. The firm pays out 50% of its earnings as dividends. What is the expected return of this stock?
Flag this Question Question 101 pts Broden, Inc. recently issued $70 par value preferred stock that pays an annual dividend of $19. If the stock is currently selling for $50, what is the expected return of this preferred stock?
Flag this Question Question 111 pts Crossroad Corporation is trying to decide whether to invest to automate a production line. If the project is accepted, labor costs will decrease by $165,000 per year. However, other cash operating expenses will increase by $86,000 per year. The equipment will cost $260,000 and is depreciable over 10 years using simplified straight line to a zero salvage value. Crossroad will invest $10,000 in net working capital at installation. The firm has a marginal tax rate of 34%. Calculate the firm's annual cash flows associated with the new project.
Flag this Question Question 121 pts Eastern Corporation has $21,000,000 in equipment that has a 15 year class life. The equipment is 8 years old. Eastern is selling the equipment for $10,000,000. Eastern uses simplified straight line depreciation (zero salvage value) and has a marginal tax rate of 34%. What is the terminal cash flow? Assume no working capital.
Flag this Question Question 131 pts Riverview Company is evaluating the proposed acquisition of a new production machine. The machine's base price is $200,000, and installation costs would amount to $28,000. Also, $10,000 in net working capital would be required at installation. The machine will be depreciated for 3 years using simplified straight line depreciation. The machine would save the firm $110,000 per year in operating costs. The firm is planning to keep the machine in place for 2 years. At the end of the second year, the machine will be sold for $50,000. Riverview has a cost of capital of 12% and a marginal tax rate of 34%.
What is the NPV of the project?
Flag this Question Question 141 pts Riverview Company is evaluating the proposed acquisition of a new production machine. The machine's base price is $200,000, and installation costs would amount to $28,000. Also, $10,000 in net working capital would be required at installation. The machine will be depreciated for 3 years using simplified straight line depreciation. The machine would save the firm $110,000 per year in operating costs. The firm is planning to keep the machine in place for 5 years. At the end of the fifth year, the machine will be sold for $20,000. Riverview has a cost of capital of 12% and a marginal tax rate of 34%.
What is the IRR of the project?
Flag this Question Question 151 pts Riverview Company is evaluating the proposed acquisition of a new production machine. The machine's base price is $200,000, and installation costs would amount to $28,000. Also, $10,000 in net working capital would be required at installation. The machine will be depreciated for 3 years using simplified straight line depreciation. The machine would save the firm $110,000 per year in operating costs. The firm is planning to keep the machine in place for 2 years. At the end of the second year, the machine will be sold for $100,000. Riverview has a cost of capital of 12% and a marginal tax rate of 34%.
What is the NPV of the project?
Flag this Question Question 161 pts
Southern Corporation has a capital structure of 40% debt and 60% common equity. This capital structure is expected not to change. The firm's tax rate is 34%. The firm can issue the following securities to finance capital investments:
Debt: Capital can be raised through bank loans at a pretax cost of 8.5%. Also, bonds can be issued at a pretax cost of 10%.
Common Stock: Retained earnings will be available for investment. In addition, new common stock can be issued at the market price of $59. Flotation costs will be $3 per share. The recent common stock dividend was $3.15. Dividends are expected to grow at 7% in the future.
What is the cost of capital if the firm uses bonds and issues new common stock?
Flag this Question Question 171 pts
Bay Beach Industries wants to maintain their capital structure of 40% debt and 60% equity. The firm's tax rate is 34%. The firm can issue the following securities to finance the investments:
Bonds: Mortgage bonds can be issued at a pre-tax cost of 9 percent. Debentures can be issued at a pre-tax cost of 10.5 percent.
Common Equity: Some retained earnings will be available for investment. In addition, new common stock can be issued at the market price of $46. Flotation costs will be $3 per share. The recent common stock dividend was $3.60. Dividends are expected to grow at 6% in the future.
What is the cost of capital using mortgage bonds and internal equity?
Flag this Question Question 181 pts A firm has preferred stock that pays an 8 percent dividend on a $75 par value. If a new issue is offered, flotation costs will be 3 percent of the current market price of $80. The firm's marginal tax rate is 35 percent. What is the firm's cost of preferred stock financing?
Flag this Question Question 191 pts Hampton Corporation has a beta of 1.6 and a marginal tax rate of 34%. The expected return on the market is 11% and the risk-free interest rate is 6%. Estimate the firm?s cost of internal equity.
Flag this Question Question 201 pts St. Thomas Company is planning to issue $1,000 par value bonds. The bonds will have a coupon rate of 9.5 percent and will be sold at a market price of $980. Flotation costs will amount to 4 percent of market value. The bonds will mature in 15 years and coupon payments will be semi-annual. St. Thomas' marginal tax rate is 35%. What is the firm's cost of debt financing?
Question 2 1 pts A replacement computer will cost you $3,500, but save you $750 each year because of the faster processor. What is the payback period of the computer? 4.91 4.80 4.38 4.57 4.67 Flag this Question Question 3 1 pts A new transmission in your truck will cost $7,500. Luckily, it should reduce maintenance expense by $3,525 each year for the next 10 years. What is the profitability index of the transmission? Use a discount rate of 12.3%. 2.99 2.62 2.76 2.81 2.40 Flag this Question Question 4 1 pts A new security system has a price-tag of $7,500, but should save your company $3,275 each year for the next 10 years in reduced thefts. What is the IRR of the security system? 38.25% 42.40% 44.98% 45.01% 38.88% Flag this Question Question 5 1 pts Given the following cash flows for two mutually exclusive projects, and a required rate of return of 12%, what is the EAA for Project B? Year 0 1 2 3 Project A -300,000 150,000 150,000 80,000 Project B -300,000 70,000 70,000 120,000 4 5 6 80,000 120,000 120,000 60,000 61,292 19,086 20,179 69,055 78,468 Flag this Question Question 6 1 pts SanData Inc. recently paid its annual dividend of $3. Dividends have consistently grown at a rate of 3%. You estimate that the stock has a required return of 17%. What is the intrinsic value of this stock? $21.60 $22.07 $23.62 $21.01 $19.99 Flag this Question Question 7 1 pts DJ Industries has outstanding $70 par value preferred stock that pays a 7.75% dividend rate per year. You estimate that the stock has a required discount rate of 18%. What is the intrinsic value of this preferred stock? $30.60 $30.14 $31.06 $32.75 $27.41 Flag this Question Question 8 1 pts Driver Products recently paid its annual dividend of $2, and reported an ROE of 15%. The firm pays out 50% of its earnings as dividends. The stock has a beta of 1.44. The current risk-free rate is 2.5% and the market return is 11%. Assuming that CAPM holds, what is the intrinsic value of this stock? $29.70 $31.11 $29.12 $31.44 $31.38 Flag this Question Question 9 1 pts Sparrow Products Industries stock is currently selling for $80. It just paid its annual dividend of $2 after reporting an ROE of 15%. The firm pays out 50% of its earnings as dividends. What is the expected return of this stock? 9.60% 10.71% 9.30% 10.19% 9.52% Flag this Question Question 10 1 pts Broden, Inc. recently issued $70 par value preferred stock that pays an annual dividend of $19. If the stock is currently selling for $50, what is the expected return of this preferred stock? 40.69% 39.11% 39.70% 38.00% 41.34% Flag this Question Question 11 1 pts Crossroad Corporation is trying to decide whether to invest to automate a production line. If the project is accepted, labor costs will decrease by $165,000 per year. However, other cash operating expenses will increase by $86,000 per year. The equipment will cost $260,000 and is depreciable over 10 years using simplified straight line to a zero salvage value. Crossroad will invest $10,000 in net working capital at installation. The firm has a marginal tax rate of 34%. Calculate the firm's annual cash flows associated with the new project. $53,000 $79,000 $52,140 $60,980 $34,980 Flag this Question Question 12 1 pts Eastern Corporation has $21,000,000 in equipment that has a 15 year class life. The equipment is 8 years old. Eastern is selling the equipment for $10,000,000. Eastern uses simplified straight line depreciation (zero salvage value) and has a marginal tax rate of 34%. What is the terminal cash flow? Assume no working capital. 9,932,000 10,068,000 6,468,000 6,600,000 7,660,000 Flag this Question Question 13 1 pts Riverview Company is evaluating the proposed acquisition of a new production machine. The machine's base price is $200,000, and installation costs would amount to $28,000. Also, $10,000 in net working capital would be required at installation. The machine will be depreciated for 3 years using simplified straight line depreciation. The machine would save the firm $110,000 per year in operating costs. The firm is planning to keep the machine in place for 2 years. At the end of the second year, the machine will be sold for $50,000. Riverview has a cost of capital of 12% and a marginal tax rate of 34%. What is the NPV of the project? $76,000 $108,440 $22,440 $9,555 -$16,752 Flag this Question Question 14 1 pts Riverview Company is evaluating the proposed acquisition of a new production machine. The machine's base price is $200,000, and installation costs would amount to $28,000. Also, $10,000 in net working capital would be required at installation. The machine will be depreciated for 3 years using simplified straight line depreciation. The machine would save the firm $110,000 per year in operating costs. The firm is planning to keep the machine in place for 5 years. At the end of the fifth year, the machine will be sold for $20,000. Riverview has a cost of capital of 12% and a marginal tax rate of 34%. What is the IRR of the project? 19.7% 9.5% 14.1% 28.2% 31.3% Flag this Question Question 15 1 pts Riverview Company is evaluating the proposed acquisition of a new production machine. The machine's base price is $200,000, and installation costs would amount to $28,000. Also, $10,000 in net working capital would be required at installation. The machine will be depreciated for 3 years using simplified straight line depreciation. The machine would save the firm $110,000 per year in operating costs. The firm is planning to keep the machine in place for 2 years. At the end of the second year, the machine will be sold for $100,000. Riverview has a cost of capital of 12% and a marginal tax rate of 34%. What is the NPV of the project? $3,875 $9,555 - $9,783 $12,155 $19,016 Flag this Question Question 16 1 pts Southern Corporation has a capital structure of 40% debt and 60% common equity. This capital structure is expected not to change. The firm's tax rate is 34%. The firm can issue the following securities to finance capital investments: Debt: Capital can be raised through bank loans at a pretax cost of 8.5%. Also, bonds can be issued at a pretax cost of 10%. Common Stock: Retained earnings will be available for investment. In addition, new common stock can be issued at the market price of $59. Flotation costs will be $3 per share. The recent common stock dividend was $3.15. Dividends are expected to grow at 7% in the future. What is the cost of capital if the firm uses bonds and issues new common stock? 10.4% 9.9% 10% 11% 11.8% Flag this Question Question 17 1 pts Bay Beach Industries wants to maintain their capital structure of 40% debt and 60% equity. The firm's tax rate is 34%. The firm can issue the following securities to finance the investments: Bonds: Mortgage bonds can be issued at a pre-tax cost of 9 percent. Debentures can be issued at a pre-tax cost of 10.5 percent. Common Equity: Some retained earnings will be available for investment. In addition, new common stock can be issued at the market price of $46. Flotation costs will be $3 per share. The recent common stock dividend was $3.60. Dividends are expected to grow at 6% in the future. What is the cost of capital using mortgage bonds and internal equity? 13.12% 10.96% 11.35% 11.69% 11.30% Flag this Question Question 18 1 pts A firm has preferred stock that pays an 8 percent dividend on a $75 par value. If a new issue is offered, flotation costs will be 3 percent of the current market price of $80. The firm's marginal tax rate is 35 percent. What is the firm's cost of preferred stock financing? 8.0% 7.4% 5.0% 6.7% 7.7% Flag this Question Question 19 1 pts Hampton Corporation has a beta of 1.6 and a marginal tax rate of 34%. The expected return on the market is 11% and the risk-free interest rate is 6%. Estimate the firm's cost of internal equity. 6.56% 12.8% 13.8% 12.5% 14.0% Flag this Question Question 20 1 pts St. Thomas Company is planning to issue $1,000 par value bonds. The bonds will have a coupon rate of 9.5 percent and will be sold at a market price of $980. Flotation costs will amount to 4 percent of market value. The bonds will mature in 15 years and coupon payments will be semiannual. St. Thomas' marginal tax rate is 35%. What is the firm's cost of debt financing? 9.76% 6.93% 6.34% 10.28% 6.68%
