Question

1. Suppose you sell a fixed asset for $77,000 when it's bookvalue is $84,000. If your company's marginal tax rate is 33%, whatwill be the effect on cash flows of this sale (i.e., what will bethe after-tax cash flow of this sale)?

$79,310

$84,000

$51,590

$7,000

2.

Portfolio Weights If you own 705 shares of AirLine Inc at $42.7, 320 shares of BuyRite at $55.95, and 420 sharesof Motor City at $10.0, what are the portfolio weights of eachstock?

Air Line = .3333, BuyRite = .3333, MotorCity = .3333

Air Line = .4879, BuyRite = .2215, MotorCity = .2907

Air Line = .7050, BuyRite = .3200, MotorCity = .4200

Air Line = .5768, BuyRite = .3431, MotorCity = .0801

3.

Selling Stock with a Limit Order You would liketo sell 400 shares of Pfizer, Inc.(PFE). The current bid and askquotes are $27.30 and $27.33, respectively. You place a limitsell-order at $27.32. If the trade executes, how much money do youreceive from the buyer?

$10,920

$21,852

$10,932

$10,928

4.

Expected Return Circuit City Stores (CC)recently paid a $.26 dividend. The dividend is expected to grow ata 24.00 percent rate. At the current stock price of $8.96, what isthe return shareholders are expecting?

27.60%

2.90%

24.00%

24.03%

5.

Portfolio Beta You own $22,500 of City Steelstock that has a beta of 3.33. You also own $39,000 of Rent-N-Co(beta = 1.78) and $20,800 of Lincoln Corporation (beta = -.82).What is the beta of your portfolio?

4.86

1.55

4.29

1.00

6.

Portfolio Return At the beginning of the month,you owned $10,100 of Company G, $10,200 of Company S, and $15,400of Company N. The monthly returns for Company G, Company S, andCompany N were 9.4 percent, -1.27 percent, and 9.3 percent. What isyour portfolio return? (Round intermediate calculations to 2decimal places.)

17.45%

6.66%

5.82%

6.26%

7.

Suppose your firm is considering investing in a project with thecash flows shown below, that the required rate of return onprojects of this risk class is 10 percent, and that the maximumallowable payback and discounted payback statistic for the projectare 2 and 3 years, respectively.

Time	0	1	2	3	4	5	6
CashFlow	-1,070	100	500	700	700	300	700

Use the discounted payback decision rule to evaluate this project;should it be accepted or rejected?

3.08 years, reject

2.83 years, accept

2.92 years, accept

3.09 years, reject

8.

Portfolio Weights If you own 330 shares of AirLine Inc at $19.65, 260 shares of BuyRite at $10.6, and 440 sharesof Motor City at $46.65, what are the portfolio weights of eachstock?

Air Line = .2178, BuyRite = .0926, MotorCity = .6896

Air Line = .3333, BuyRite = .3333, MotorCity = .3333

Air Line = .3300, BuyRite = .2600, MotorCity = .4400

Air Line = .3204, BuyRite = .2524, MotorCity = .4272

9.

Suppose your firm is considering investing in a project with thecash flows shown below, that the required rate of return onprojects of this risk class is 12 percent, and that the maximumallowable payback and discounted payback statistic for the projectare 2 and 3 years, respectively.

Time	0	1	2	3	4	5	6
CashFlow	-1,150	30	570	770	770	370	770

Use the NPV decision rule to evaluate this project; should it beaccepted or rejected?

$2,118.66, accept

$864.87, accept

$-495.13, reject

$968.66, accept

10.

JackITs has 5.6 million shares of common stock outstanding, 1.6million shares of preferred stock outstanding, and 26.00 thousandbonds. If the common shares are selling for $28.60 per share, thepreferred share are selling for $14.10 per share, and the bonds areselling for 97.94 percent of par, what would be the weight used forequity in the computation of JackIT's WACC?

77.50%

33.33%

76.93%

66.67%