1. Gutweed Co. is considering a project with an initial cost of $4 million. The project will produce cash inflows of $1.5 million a year for five years. The firm has a weighted average cost of capital of 9%. Assume that the project has an average risk level as the whole firm. What is the net present value of the project?

   		$1.83 million
   		$3.22 million
   		$0.92 million
   		$2.41 million

Given the following data for a stock: beta = 1.2; risk-free rate = 3%; market rate of return = 13%; and expected rate of return on the stock = 17%. Then the stock is:

Kolby’s Korndogs is looking at a new sausage system with an installed cost of $685,000. The asset qualifies for 100 percent bonus depreciation and can be scrapped for $91,000 at the end of the project’s 5-year life. The sausage system will save the firm $195,000 per year in pretax operating costs, and the system requires an initial investment in net working capital of $47,000. If the tax rate is 21 percent and the discount rate is 10 percent, what is the NPV of this project?

1. Which one of the following factors is not considered in calculating the firm’s cost of equity?

1. risk free rate of return
2. beta
3. interest rate on corporate debt
4. expected return on equities
5. difference between expected return on stocks and the risk free rate of return

2. Which one of the following factors is not considered in calculating the firm’s cost of capital?

1. cost of equity
2. interest rate on debt
3. the firm’s marginal tax rate
4. book value of debt and equity
5. the firm’s target debt to equity ratio

3. A firm’s leveraged beta reflects all of the following except for

1. unleveraged beta
2. the firm’s debt
3. marginal tax rate
4. the firm’s cost of equity
5. the firm’s equity

Explain how the cost of capital (rate) is calculated and how it is used in capital budgeting decisions.

If the demand curve is Q(p) = 15 -p and the marginal cost is constant at 3, what is the profit maximizing monopoly price and output? What is the price elasticity at the monopoly price and output?

Kolby’s Korndogs is looking at a new sausage system with an installed cost of $670,000. This cost will be depreciated straight-line to zero over the project’s 5-year life, at the end of which the sausage system can be scrapped for $88,000. The sausage system will save the firm $213,000 per year in pretax operating costs, and the system requires an initial investment in net working capital of $41,000. If the tax rate is 23 percent and the discount rate is 11 percent, what is the NPV of this project? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

Marshall Inc., is looking at a new bottle system that costs $473,522. It will cost an additional $63,445 to modify the system for special use by the firm. The new equipment is classified as five-year property under MACRS (20%, 32%, 19.20%, 11.52%, 11.52%, and 5.76%). Suppose the bottle system will be scrapped for $70,609 at the end of year 4. The new system will increase pre-tax revenues by $249,600 per year, but pre-tax costs will also increase by $40,080 per year. The system requires an initial investment in net working capital of $39,616. If the tax rate is 32 percent and the discount rate is 6.37 percent, what is the NPV of this project?

[Round the final answer to the nearest cent]

) Dog Up! Franks is looking at a new sausage system with an installed cost of $411,500. This cost will be depreciated straight-line to zero over the project's seven-year life, at the end of which the sausage system is expected to be sold for $35,000 cash. No bonus depreciation will be taken. The sausage system will save the firm $129,400 per year in pretax operating costs, and the system requires an initial investment in net working capital of $22,500. All of the net working capital will be recovered at the end of the project. The tax rate is 23 percent and the discount rate is 13.2 percent. What is the net present value of this project

P.S How to calculate NPV, explanations needed!!!

Calvin Hotdogs is looking at a new sausage system with an installed cost of $685,500. This cost will be depreciated straight-line to zero over the project's five-year life, at the end of which the sausage system can be scrapped for $91,000. The sausage system will save the firm $195,000 per year in pretax operating costs, and you will be able to reduce working capital by $47,000 at the beginning of the project. If the tax rate is 21 percent and the discount rate is 10%, what is the NPV of this project?

b.List the steps in the Internet value chain, and discuss the time, quality, and cost of the
experience to the consumer.

c.What cost, quality, and time benefits will Ford likely encounter with their new
arrangement with CarPoint? What causes these benefits?
d. How will a service like CarPoint likely affect dealers’ behavior toward their customers?