1)Total assets are $1000, fixed assets are $700, long-term debt is $250, and short-term debt is $300. What is the amount of net working capital?A$0B.$50C.$300D.$650E.$700Net working capital = $1000 – $700 – $300 = $03)Your parents are giving you $100 a month for four years while you are in college. At a 6% discount rate, what are these payments worth to you when you first start college?A.$3,797.40B.$4,167.09C.$4,198.79D.$4,258.03E.$4,279.32.4)The great, great grandparents of one of your classmates sold their factory to the government 104 years ago for $150,000. If these proceeds had been invested at 6%, how much would this legacy be worth today? Assume annual compounding.A.$936,000.00B.$1,086,000.00C.$60,467,131.54D.$60,617,131.54E.$64,254,159.445)An investment project has the cash flow stream of $-3250, $80, $200, $75, and $90. The cost of capital is 12%. What is the discounted payback period?A.1.24 yearsB.1.85 yearsC.2.24 yearsD.2.85 yearsE.3.05 years6) An investment cost $12,000 with expected cash flows of $4,000 for 4 years. The discount rate is 15.2382%. The NPV is ______ and the IRR is ______ for the project.A.-$634.89; 12.60%B.$0; 15.2382%C.$4,000; 0%D.Can not answer without one or the other value as input.E.None of these.7) Thornley Machines is considering a 3-year project with an initial cost of $618,000. The project will not directly produce any sales but will reduce operating costs by $265,000 a year. The equipment is depreciated straight-line to a zero book value over the life of the project. At the end of the project the equipment will be sold for an estimated $60,000. The tax rate is 34%. The project will require $23,000 in extra inventory for spare parts and accessories. Should this project be implemented if Thornley’s requires a 9% rate of return? Why or why not?A.No; The NPV is -$2,646.00.B.Yes; The NPV is $27,354.00.C.Yes; The NPV is $32,593.78.D.Yes; The NPV is $43,106.54.E.Yes; The NPV is $196,884.40.8)A project will produce operating cash flows of $45,000 a year for four years. During the life of the project, inventory will be lowered by $30,000 and accounts receivable will increase by $15,000. Accounts payable will decrease by $10,000. The project requires the purchase of equipment at an initial cost of $120,000. The equipment will be depreciated straight-line to a zero book value over the life of the project. The equipment will be salvaged at the end of the project creating a $25,000 after-tax cash flow. At the end of the project, net working capital will return to its normal level. What is the net present value of this project given a required return of 14%?A.$3,483.48B.$16,117.05C.$27,958.66D.$32,037.86E.$49,876.029) What are the arithmetic and geometric average returns for a stock with annual returns of 5%, 8%, -3%, and 16%?A.6.5%; 6.28%B.6.5%; 9.21%C.9.3%; 6.28%D.9.3%; 9.21%E.10.25%; 8.31%10) A year ago, you purchased 300 shares of IXC Technologies, Inc. stock at a price of $10.05 per share. The stock pays an annual dividend of $.10 per share. Today, you sold all of your shares for $29.32 per share. What is your total dollar return on this investment?A.$8,781B.$8,796C.$8,811D.$8,832E.$8,92111)What is the expected return on a portfolio comprised of $3,000 in stock K and $5,000 in stock L if the economy is normal?A.3.75%B.5.25%C.5.63%D.5.88%E.6.80%12) You have a $1,000 portfolio which is invested in stocks A and B plus a risk-free asset. $400 is invested in stock A. Stock A has a beta of 1.3 and stock B has a beta of .7. How much needs to be invested in stock B if you want a portfolio beta of .90?A.$0B.$268C.$482D.$543E.$60013) Gail’s Dance Studio is currently an all equity firm that has 80,000 shares of stock outstanding with a market price of $42 a share. The current cost of equity is 12% and the tax rate is 34%. Gail is considering adding $1 million of debt with a coupon rate of 8% to her capital structure. The debt will be sold at par value. What is the levered value of the equity?A.$2.4 millionB.$2.7 millionC.$3.3 millionD.$3.7 millionE.$3.9 million14) The Winter Wear Company has expected earnings before interest and taxes of $2,100, an unlevered cost of capital of 14% and a tax rate of 34%. The company also has $2,800 of debt that carries a 7% coupon. The debt is selling at par value. What is the value of this firm?A.$9,900B.$10,852C.$11,748D.$12,054E.$12,70015) The Montana Hills Co. has expected earnings before interest and taxes of $8,100, an unlevered cost of capital of 11%, and debt with both a book and face value of $12,000. The debt has an annual 8% coupon. The tax rate is 34%. What is the value of the firm?A.$48,600B.$50,000C.$52,680D.$56,667E.$60,60016) Your firm has a debt-equity ratio of .75. Your pre-tax cost of debt is 8.5% and your required return on assets is 15%. What is your cost of equity if you ignore taxes?A.11.25%B.12.21%C.16.67%D.19.88%E.21.38%18) Regional Power wants to raise $10 million in new equity. The subscription price is $20. There are currently 3 million shares outstanding, each with 1 right. How many rights are needed to purchase 1 share?A.1B.3C.5D.6E.819) For a particular stock the old stock price is $20, the ex-rights price is $15, and the number of rights needed to buy a new share is 2. Assuming everything else constant, the subscription price is ______.A.$5B.$13C.$17D.$18E.$20
