Identify whether each statement below is TRUE or FALSE. (20 pts)

a)In a world with no taxes, a firm’s capital structure is irrelevent meaning that WACC is constant for all levels of D/E. True  False

b)WACC always reflects the fair value return on a firm’s assets regardless of whether or not interest expense is tax deductible

True  False

c)If interest expense is tax deductible, issuing debt creates a new asset whose value equals the present value of the avoided tax due to the interest expense. True  False

d)In a world where interest expense is tax deductibile and bank-ruptcy costs are significant, there is an optimal capital structure is when the marginal increase in the tax shield is offset by marginal bankprutcy costs. True  False

e)A firm’s cost of equity (r_e) increases with increasing D/E due to greater business risk. True  False

f)Firms having the same business risk must also have the same beta (e.g. systematic risk). True  False

g)In a world with no taxes, the firm’s cost of equity is constant across all D/E ratios less than 1.0.  True  False

h)A firm should use its WACC to evaluate all capital projects regardless of their nature and how they are financed.  True  False

i) The greater a stock’s total risk as measured by its standard deviation, the higher its expected return. True False  

j)A project’s IRR is the rate which makes the NPV = 0.  True False    

You plan to invest in the Kish Hedge Fund, which has total capital of $500 million invested in five stocks:

Kish's beta coefficient can be found as a weighted average of its stocks' betas. The risk-free rate is 3%, and you believe the following probability distribution for future market returns is realistic:

1. What is the equation for the Security Market Line (SML)? (Hint: First determine the expected market return.)
   
   1. r_i = 3.0% + (10.0%)b_i
   2. r_i = 1.7% + (10.7%)b_i
   3. r_i = 3.0% + (10.9%)b_i
   4. r_i = 5.8% + (10.0%)b_i
   5. r_i = 5.8% + (10.9%)b_i
   
   -Select-IIIIIIIVVItem 1
   
2. Calculate Kish's required rate of return. Do not round intermediate calculations. Round your answer to two decimal places.
     %
   
3. Suppose Rick Kish, the president, receives a proposal from a company seeking new capital. The amount needed to take a position in the stock is $50 million, it has an expected return of 14%, and its estimated beta is 1.5. Should Kish invest in the new company?
   The new stock -Select-should notshouldItem 3 be purchased.
   
   At what expected rate of return should Kish be indifferent to purchasing the stock? Round your answer to two decimal places.
     %

1. A long cable has current I. If the magnitude of the magnetic field at a distance d is B, determine the magnitude of the magnetic field at a distance 2d from the cable.

a. 2B

b. 8B

c. 4B

d. B / 2

e. B / 4

QUESTION 2

1. A circular cable consists of 5 loops with a diameter of 1.0 m each. The cable is placed in an external magnetic field of 0.5 T. When the cable has a current of 4.0 A, it experiences a torque of 4.0 A. Determine the angle between the plane of the cable and the direction of the magnetic field.

a. 0 degrees

b. 30 degrees

c. 90 degrees

d. 45 degrees

e. 60 degree

QUESTION 3

1. I suppose a certain electric cable can carry a maximum current of 125 A. Determine the magnitude of the magnetic field at a point 4.5 m away from the cable.

a. 5.56 x 10 ^ -6 T

b. 3.49 x 10 ^ -5 T

c. 4.69 x 10 ^ -4 T

d. 7.95 x 10 ^ -3 T

e. 1.75 x 10 ^ -5 T

QUESTION 4

1. A 0.150 m long cable is horizontally oriented and has a current of 12.5 A and is in a magnetic field region of 0.625 T. The angle between the direction of the current and the magnetic field is 25 degrees. Determine the magnitude of the magnetic force on the cable.

a. 0.495 N

b. 0.792 N

c. 1.44 N

d. 3.30 N

e. 1.17 N

1. You are analyzing a project with the following cash flows:

Year 0:      -240,000

Year 1:      + 10,000

Year 2:      + 55,000

Year 3:      +100,000

Year 4:      +380,000

What is the NPV for this project, using a 15% discount rate?

Multiple Choice

• The Project has an NPV of $69,281

• The Project has an NPV of $58,445

• The Project has an NPV of $70,617

• The Project has an NPV of $93,301

What is the IRR for this project?

Multiple Choice

• The Project has an IRR of 26.51%

• The Project has an IRR of 28.13%

• The Project has an IRR of 22.93%

• The Project has an IRR of 19.32%

What is the Payback for this project:

Multiple Choice

• The Project has a payback of 3.20 years

• The Project has a payback of 3.88 years

• The Project has a payback of 3.05 years

• The Project has a payback of 3.28 years

What is the Profitability Index for this Project

Multiple Choice

• The Project has a P.I. of 1.65

• The Project has a P.I. of 2.33

• The Project has a P.I. of 1.39

• The Project has a P.I. of 1.44

Based on your analysis and given what you know about capital budgeting, which one of the following statements is correct regarding the Project just analyzed in the previous 5 questions (#14-#18)?

Multiple Choice

• You should accept the Project since its IRR is lower than the hurdle rate of 15%

• You should reject the Project

• You should accept the Project, since its Profitability Index is less than 1.0

• You should accept the Project, since its NPV is positive

You plan to invest in the Kish Hedge Fund, which has total capital of $500 million invested in five stocks:

Kish's beta coefficient can be found as a weighted average of its stocks' betas. The risk-free rate is 3%, and you believe the following probability distribution for future market returns is realistic:

1. What is the equation for the Security Market Line (SML)? (Hint: First determine the expected market return.)
   1. r_i = 4.4% + (10.5%)b_i
   2. r_i = 3.0% + (10.6%)b_i
   3. r_i = 7.0% + (10.2%)b_i
   4. r_i = 3.0% + (10.5%)b_i
   5. r_i = 4.4% + (10.6%)b_i

   -Select-IIIIIIIVVItem 1

2. Calculate Kish's required rate of return. Do not round intermediate calculations. Round your answer to two decimal places.

     %

3. Suppose Rick Kish, the president, receives a proposal from a company seeking new capital. The amount needed to take a position in the stock is $50 million, it has an expected return of 15%, and its estimated beta is 1.4. Should Kish invest in the new company?

   The new stock -Select-should notshouldItem 3 be purchased.

   At what expected rate of return should Kish be indifferent to purchasing the stock? Round your answer to two decimal places.

     %

You plan to invest in the Kish Hedge Fund, which has total capital of $500 million invested in five stocks:

Kish's beta coefficient can be found as a weighted average of its stocks' betas. The risk-free rate is 3%, and you believe the following probability distribution for future market returns is realistic:

1. What is the equation for the Security Market Line (SML)? (Hint: First determine the expected market return.)
   1. r_i = 3.0% + (9.4%)b_i
   2. r_i = 3.2% + (10.6%)b_i
   3. r_i = 3.2% + (9.4%)b_i
   4. r_i = 3.0% + (10.6%)b_i
   5. r_i = 1.4% + (9.8%)b_i

   -Select-IIIIIIIVVItem 1

2. Calculate Kish's required rate of return. Do not round intermediate calculations. Round your answer to two decimal places.

     %

3. Suppose Rick Kish, the president, receives a proposal from a company seeking new capital. The amount needed to take a position in the stock is $50 million, it has an expected return of 17%, and its estimated beta is 1.5. Should Kish invest in the new company?

   The new stock -Select-should notshouldItem 3 be purchased.

   At what expected rate of return should Kish be indifferent to purchasing the stock? Round your answer to two decimal places.

     %

Iconic memory is a type of memory that holds visual information for about half a second (0.5 seconds). To demonstrate this type of memory, participants were shown three rows of four letters for 50 milliseconds. They were then asked to recall as many letters as possible, with a 0-, 0.5-, or 1.0-second delay before responding. Researchers hypothesized that longer delays would result in poorer recall. The number of letters correctly recalled is given in the table.

(a) Complete the F-table. (Round your values for MS and F to two decimal places.)

(b) Compute Tukey's HSD post hoc test and interpret the results. (Assume alpha equal to 0.05. Round your answer to two decimal places.)

The critical value is  for each pairwise comparison.

Which of the comparisons had significant differences? (Select all that apply.)

The null hypothesis of no difference should be retained because none of the pairwise comparisons demonstrate a significant difference.Recall following no delay was significantly different from recall following a one second delay.Recall following a half second delay was significantly different from recall following a one second delay.Recall following no delay was significantly different from recall following a half second delay.

You plan to invest in the Kish Hedge Fund, which has total capital of $500 million invested in five stocks:

Kish's beta coefficient can be found as a weighted average of its stocks' betas. The risk-free rate is 4%, and you believe the following probability distribution for future market returns is realistic:

1. What is the equation for the Security Market Line (SML)? (Hint: First determine the expected market return.)
   1. r_i = 2.3% + (9.2%)b_i
   2. r_i = 2.3% + (11.1%)b_i
   3. r_i = 4.0% + (9.2%)b_i
   4. r_i = 5.3% + (8.6%)b_i
   5. r_i = 4.0% + (11.1%)b_i

   -Select-IIIIIIIVVItem 1

2. Calculate Kish's required rate of return. Do not round intermediate calculations. Round your answer to two decimal places.

     %

3. Suppose Rick Kish, the president, receives a proposal from a company seeking new capital. The amount needed to take a position in the stock is $50 million, it has an expected return of 16%, and its estimated beta is 1.4. Should Kish invest in the new company?

   The new stock should or should not be purchased.?

   At what expected rate of return should Kish be indifferent to purchasing the stock? Round your answer to two decimal places.

     %