Urgent Need (Explanation Require)

Multiple Choice Questions. 1. Similar to the example given in class, assume that a corporation has $500 of cash revenue and $300 of cash expenses. Therefore the corporation has $200 of taxable income. The corporation pays taxes at the 40% income tax rate (i.e., all of the $200 of taxable income will be taxed at 40%). The corporation plans to pay any cash left over after the payment of income taxes to the stockholders. If the stockholders pay taxes at the 20% tax rate (i.e., any dividends they receive will be taxed at 20%), how much income tax (both corporate and individual) will be paid? A. $82 B. $104 C. $112 D. $116 E. $120 F. $140 2. A project requires an initial investment of $10 million and produces a single positive cash flow in one year. The opportunity cost of capital for the project is 8%. The expected return for the project is X%. Which of the following statements is true? A. The project will create value for the owner only if the expected return for the project is greater than 8%. B. The project will create value for the owner if the expected return for the project is greater than 0% (even if the expected return is less than 8%) 3. A project requires an initial investment of $1000 and produces one of two cash flows in one year: $1300 or $900. The probability of the $1300 cash flow is 40%. The probability of the $900 cash flow is 60%. Using a 10% discount rate, what is the NPV of the project? A. -$140.00 B. -$60.00 C. -36.36 D. $36.36 E. $60.00 F. $140.00 4. Today is January 1, 2000. A newly formed corporation raises $10 million through a stock issue and uses the money to purchase $10 million of land, buildings, and equipment in order to undertake a new project. The corporation has no other assets. Therefore, the January 1, 2000 book value (accounting value) for the assets is $10,000,000. Managers of the corporation and outside investors know that the project NPV is negative. Based on this, the market value of the firms assets is _______ the book value of its assets. A. Greater than B. The same as C. Less than 5. The internal rate of return for Project A is 6%. Using an opportunity cost of capital of 8%, the NPV for Project A is +$250. Based on this information: A. The modified internal rate of return will be greater than 8%. B. The modified internal rate of return will be greater than 6%, but less than 8%. C. The modified internal rate of return will be less than 6%. D. There are not enough facts to answer this question.