1. Question 21

   A project costs $17.5 million and is expected to produce cash flows of $4 million a year for 10 years. The opportunity cost of capital is 14 percent. If the firm has to issue stock to undertake the project and issue costs are $500,000 what is the project's APV?

   1. - $1.30 million

   2. - $3.56 million

   3. $0.84 million

   4. $2.86 million

   5. $1.54 million

2. Question 22

   A firm has a project with an NPV of $78 million. If it has access to risk-free government financing that can create a permanent annual tax shield of $4.5 million, what is the APV of the project assuming the risk-free interest rate is 7 percent?

   1. - $13.71 million

   2. - $18.84 million

   3. - $17.15 million

   4. - $9.33 million

   5. - $3.67 million