1.

Genaro needs to capture a return of 40 percent

for his one-year investment in a property. He believes that he can sell the

property at the end of the year for $150,000 and that the property will provide

him with rental income of $25,000. What is the maximum amount that Genaro

should be willing to pay for the property?

2.

The process of identifying the bundle of

projects that creates the greatest total value and allocating the available

capital to the projects is known as

3.

You are considering a project that has an

initial cost of $1,200,000. If you take the project, it will produce net cash

flows of $300,000 per year for the next six years. If the appropriate discount

rate for the project is 10 percent, what is the profitability index of the

project?

4.

What might cause a firm to face capital

rationing?

5.

The WACC for a firm is 19.75 percent. You know

that the firm is financed with $75 million of equity and $25 million of debt.

The cost of debt capital is 7 percent. What is the cost of equity for the firm?

6.

Bellamee, Inc., has semiannual bonds outstanding with

five years to maturity and are priced at $920.87. If the bonds have a coupon

rate of 7 percent, then what is the YTM for the bonds?

7.

Beckham Corporation has semiannual bonds

outstanding with 13 years to maturity and are currently priced at $746.16. If

the bonds have a coupon rate of 8.5 percent, then what is the after-tax cost of

debt for Beckham if its marginal tax rate is 35%? Assume that your calculation

is made as on Wall Street.

8.

RadicalVenOil, Inc., has a cost of equity

capital equal to 22.8 percent. If the risk-free rate of return is 10 percent

and the expected return on the market is 18 percent, then what is the firm’s

beta if the firm’s marginal tax rate is 35 percent?

9.

Which type of project do financial managers

typically use the highest cost of capital when evaluating?