11. The Alibaba Group wants to realise a $10 million investment project and finance it with $4 million of equity and $6 million of debt. The levered beta of this investment equals 1.5. The risk-free rate is 2%, the expected market return is 4% and the marginal tax rate is 40%. What is the equity cost of capital of this investment project?

    A) 7% B) 6% C) 4% D) 5%

12. Consider a financial product that provides double the inverse return of the S&P500, what is the market beta of this product? A) 1.5 B) -1

    C) 1 D) -2

13. Firm XYZ has an equity beta of 2.58, what is the beta of its underlying operations? XYZ has a debt to value ratio of 64% and its debt is rated B with a beta of 0.30. The marginal tax rate is 35% and the risk-free rate is 4%. A) 1.05

    B) 0.98 C) 1.12 D) 1.10

14. The beta of a firm's operations equals 1.05. The risk-free rate is 2%. What is a possible value of the beta of this firm's operations if we take out its cash holdings? A) 1.02 B) 1.07

    C) 1 D) 1.04

15. Tesla Inc. is considering investing in a project that will yield $1 billion in perpetuity and grow at a rate of 2% per year. Tesla's equity cost of capital is 7% and its debt cost of capital of is 5%. Tesla maintains a debt to equity ratio of 50% and the project requires an initial investment of $20 billion. The corporate tax rate is 40%. What is the NPV of this project?

    1. A) $11.26 billion

    2. B) $7.27 billion

    3. C) $3.08 billion

    4. D) $17.65 billion