What is Project As NPV at cost of capital of 10%?

Project A Project B

Year Cash Flow Cash Flow

0 -$75,000 -$25,000

1 $30,000 $12,000

2 $30,000 $13,000

3 $40,000 $13,000

	a.	$3,156.83
	b.	$7,118.71
	c.	$1,008.29
	d.	-$862.85

How many years is the payback period?

Year Cash Flow

0 -$100,000

1 $40,000

2 $30,000

3 $70,000

	a.	2.74 years
	b.	2.00 years
	c.	2.43 years
	d.	2.52 years

High level of financial leverage employed by a firm means:

	a.	low cash flow to shareholders each year
	b.	high level of debt incurred by the firm
	c.	high number of shares of common stock issued
	d.	low level of debt incurred by the firm

Maximum growth rate achievable without using any external financing is best described as:

	a.	short-term growth rate
	b.	sustainable growth rate
	c.	long-term growth rate
	d.	internal growth rate

If a firm is currently operating at full capacity, it can be assumed that

	a.	fixed assets on a pro forma statement may remain unchanged with increase in sales
	b.	long-term debt on a pro forma statement remain unchanged with increase in sales
	c.	long-term debt on a pro forma statement change proportionately with increase in sales
	d.	fixed assets on a pro forma statement change proportionately with increase in sales

Cash flow to creditors must be negative when:

	a.	both the cash flow from assets and the cash flow to shareholders are negative
	b.	the interests paid exceed the net new borrowings
	c.	the company repays the debt during the year
	d.	the net new borrowings exceeds the amount of interests paid