Today (October 1st, 2017), assume you plan to take a trip on 2022 December 11th, what is the number of days and number of years you have to save money for this trip? (Hint: We assume there are 360 days per year)? A. 2161 days, 6.00 years B. 1897 days, 5.27 years C. 1868 days 5.19 years D. 1868 days, 5.12 years Q2: A firm evaluates all of its projects by applying the IRR rule. What is the IRR? Should the firm accept the following project if the required rate of return is 11 percent? A. 14.26 reject B. 16.26 reject C. 16.26 accept D. 15.26 accept Q3: Assuming you work for the BEAUTY company, now you need to compute the company's WaCC using the following data: - The company has 2,000,000 shares, currentiy sold for $10 per share. - Company's debt is $3,000,000 from the company market value this year and $2,800,000 for the previous year. The interest paid this year by the company was $350,000 - The company paid a total dividend of $600,000 last year, and its expected dividend growth is 3%. In addition, the company repurchases 150,000 of its shares. - The corporate tax rate is 30%. What is the firm's cost of equity and WACC? A. 10.82%,10.17% B. 13.50%,12.50% C. 6.09%,6.06% D. 13.82%,12.29% Q4(no template): We are now developing a pro forma model based on revenue growth. Over the next five years, sales will have a 5% growth rate. If all costs represent 50% of sales, and if this year's sales are $8,100, then the net income in the fifth year will be: A. $6077.53 B. $1,826.15 C. $5168.94 D. $1,519.38 Q5(no template): An increase in equity of $2,000 and a rise in net income 10$2,500 on the balance sheet suggest the following: A. The firm paid a dividend of $500. B. The firm plowed $500 back into the company. C. $500 went into retained earnings. D. Debt increased by $2,000. Q6: (Extra point 5) : QC Grocery and Convenience Stores is considering upgrading the server system. It invested $110 million two years ago to modernize this equipment, which is expected to have a five-year useful life and a $20 million salvage value. The firm uses straight-line depreciation. The old equipment can be sold today for $80 million. A new server can be installed today for $150 million. This will have a three-year useful life and will be depreciated to zero remaining value using straight-line methods. The new equipment will allow the company to raise annual revenues by $24 million and reduce annual operating expenses by $12 million. At the end of 3 years, this equipment will be useless. Assume the firm's tax rate is 30% and the discount rate for projects of this sort is 8%. (5') a. What is the net cash flow in year 0 if the old equipment is replaced? (1') b. What are the cash flows for year 1 , year 2 , and year 3 , respectively? (2') c. What are the NPV and IRR of the replacement project? (2')
