. You expect to receive the following payments:

end of year 1 $10,000 2 $10,000 3 $10,000 4 $10,000

You plan to invest these payments in stock funds. If your investments earn 10% per year, how much will you have at the end of the 20th year?

a) $46,410 b) $213,253 c) $193,866 d) $234,578 e) $31,699

. Your neighbor Bob has two annuities. The first annuity will pay him $10,000 per month for the next 10 years. The second annuity will pay him $12,000 per month for the following 10 years (years 11 through 20). Assuming a discount rate of 5%, what is the present value of the annuities?

a) $2,074,190 b) $942,814 c) $1,131,376 d) $1,629,741 e) $1,080,795

3. Hype-Tech Corporation's common stock dividends are expected to grow by 5% per year. Recently, the firm paid a $1.40 common stock dividend. Hype-Tech has a beta of 1.30. The expected return on the S&P 500 index is 11% and the rate of return on U.S. Treasury securities is 4%. What is the stock's intrinsic value?

a) $18.15 b) $24.39 c) $21.00 d) $25.61 e) $17.28

4. A corporate bond has an 8.5% coupon rate, pays interest semiannually, and matures in 15 years. The bond's par value is $1,000 and the corporate tax rate is 21%. If investors require a 7% rate of return on these bonds, what should be the bonds value?

a) $1,919.60 b) $749.53 c) $1,137.94 d) $1,186.14 e) $425.38

5. Earthscape Corporation plans to spend $2.3 million for new equipment. Shipping and installation charges will amount to $200,000 and an initial increase in net working capital of $60,000 will be required. The equipment will replace older, less efficient equipment. The old equipment has a book value of $85,000, but Earthscape can sell it for $120,000. If Earthscape has a 21% corporate tax rate, what is the amount of their initial outlay for this project?

a) $2,560,000 b) $2,440,000 c) $2,454,700 d) $2,447,350 e) $2,432,650

6. Wellington Corporations latest capital investment will require them to purchase new, advanced production machines. The machines cost $8,000,000. They have a 5-year class life, and will be depreciated using simplified straight-line. The firms corporate tax rate is 21%. The incremental cash inflows expected over the 5-year life of the project are $2,800,000 per year, and cash expenses are $800,000 per year. In addition, the new machines will reduce defects costs by $160,000 per year. The new machines will require a $200,000 increase in net working capital at the time of installation. At the end of 5 years, the machines will be worthless. Calculate the annual cash flow resulting from this project.

a) $1,916,000 b) $1,842,400 c) $442,400 d) $1,716,000 e) $2,042,400

7. Your firm is selling a 6-year old machine that has a 10-year class life. The machine originally cost $8,000,000 and required an investment in net working capital of $100,000 at the time of installation. Your firm is selling the asset for $2,600,000. Your firms tax rate is 21%. What is the terminal cash flow?

a) $2,726,000 b) $974,000 c) $2,474,000 d) $2,574,000 e) $2,826,000

8. A firm recently issued $1,000 par value, 20-year bonds with a coupon rate of 6% and semi-annual payments. The bonds sold at par value, but flotation costs amounted to 5% of par value. The firm has a marginal tax rate of 21%. What is the firm's cost of debt for these bonds?

a) 5.09% b) 6.00% c) 4.74% d) 9.48% e) 6.45%

9. Consider the following information:

Sales: $2,000,000 Interest expense: $90,000 Variable costs: $500,000 Taxes: 88,000 Fixed costs: 1,000,000

If sales increase by 7%, what should be the increase in earnings per share?

a) 21.01% b) 10.87% c) 25.60% d) 17.07% e) 8.54%

10. Your firms goal is to earn $6,320,000 in net income next year. Your sales forecast is $26,000,000. Your firm makes electronic components that sell for $5,000 each. Your firm has a 70% contribution margin, a 21% tax rate, and no outstanding debt. What will your fixed costs be next year if you reach your goal?

a) $7,800,000 b) $18,200,000 c) $11,880,000 d) $10,200,000 e) $8,000,000