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Exam3Spring09 - Midterm 3 Name-Section Question 1 Given the...

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Midterm 3 Name------------------------------------------ Section--------- Question 1 : Given the following information and assuming straight-line depreciation to zero, what is the IRR of this project? Initial investment = $6,000; life = 4 years; cost savings = $2,500 per year; salvage value = $ 2,000 in year 4; tax rate = 35%; discount rate = 10%. a. 10.24% b. 13.51% c. 16.13% d. 21.56% e. 24.87% Question 2 : What is the WACC for a firm using 50% equity with required return of 15%, 30% debt with a required return of 9%, 20% preferred stock with a required return of 11%, and a tax rate of 35%. Question 3 : A project costs $60,000, will be depreciated straight-line to zero over its 4 year life, and will require a net working capital investment of $5,000 up-front. The firm has a tax rate of 35% and required return of 10%. The project generates Operating Cash Flows of $22,000. What is the project’s NPV? Question 4 : Consider a project with an initial investment and positive future cash flows. As the discount rate is decreased the
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