This is the basic Corporate Finance questions.

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Part One: Perfect Markets 1. Who are the owners of a corporate type firm? 2. An investment paid you a return of 30% at the end of year 1, -30% at the end of year 2, and 60% at the end of year 3. What is the total rate of return for the 3 year period? 3. What is the present value of a $1,000 return in 2 years if the prevailing interest rate is 15%? 4. A growing perpetuity will pay $500 next year, growing by 7% per year. If the prevailing interest rate is 10%, what is the PV of the growing perpetuity? 5. A project has initial cash flows of -$1,900, and $800 per year for each of 3 years thereafter. If you are facing a cost of capital of 10%, what does NPV analysis say about accepting this project? 6. A stock alternates between earning an 10% return and -7% loss each year. What is the total rate of return over 6 years with this stock? 7. The nominal interest rate is 5%, but inflation is occurring at 2.5%. Compute the real interest rate. 8. An asset has 4 possible rates of return, all equally likely: 5%, -6%, 8%, and -3%. What is the expected rate of return for this asset? 9. An asset has 4 possible rates of return, all equally likely: 5%, -6%, 8%, and -3%. What is the standard deviation of this assets return? 10. Solve for an appropriate project beta if the cost of capital is 10%, and the market is such that the risk-free rate is 7% and the expected market return is 15%. 11. It is the year 1675 and you can buy a spice ship in England for an adventure to India. If you sail, there is a 50% chance the ship will sink before it can return to England. If the ship does not sink, you can sell the spice in one year. Spice prices are related to market events and have a b of 3. The spice costs $1,000, the ship costs $10,000. If the ship makes it back, you expect to sell the spice for $30,000 (uncertain, depends on market) and you can sell the ship for $10,000 (for certain), too. Should the ship set sail if rF = 5% and E(rM) = 15%