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A project has an initial cost of $18,400 and expected cash inflows of $7,200, $8,900, and $7,500 over Years 1 to 3, respectively. What is the discounted payback period if the required rate of return is 11.2 percent?

Project A costs $47,800 with cash inflows of $34,200 in Year 1 and $28,700 in Year 2. Project B costs $63,200 with cash inflows of $21,900 in Year 1 and $59,200 in Year 2. These projects are independent and have an assigned discount rate of 15 percent. Based on the profitability index, what is your recommendation concerning these projects?

If a firm experiences _____, it makes sense to offer a longer credit period to customers.

In a booming economy, the stock of Pattee Productions is expected to return 17 percent. It is expected to return 9 percent in a normal economy and will decline 18 percent in a recessionary economy. The probability of a recession is 18 percent while the probability of a boom is 22 percent. What is the standard deviation of the returns on this stock?

The Whey Station is considering a project with an initial cost of $146,500 and cash inflows for Years 1 to 3 of $56,700, $68,500, and $71,200, respectively. What is the IRR?

The company places orders each quarter that are 56 percent of next quarter’s sales and has a 30-day payables period. The projected sales for next year are: Q1 Q2 Q3 Q4 Sales $ 54,225 $ 60,975 $ 69,525 $ 75,050 What is the accounts payable balance at the end of the second quarter?

A project produces annual net income amounts of $8,200, $17,800, and $20,900 over its 3-year life. The initial cost is $198,900, which is depreciated straight-line to a zero book value over three years. What is the average accounting rate of return if the required discount rate is 14.5 percent?

A company has an inventory period of 26.1 days, an accounts payable period of 40.7 days, and an accounts receivable period of 33.5 days. What is the company’s operating cycle?

Fancy Footwear has a line of credit with a local bank in the amount of $175,000. The loan agreement calls for annual interest of 6.8 percent with a compensating balance of 3 percent of the total amount borrowed. The compensating balance will be deposited into an interest-free account. What is the effective interest rate on the loan if the firm needs $125,000 to cover expenses for one year?

Russell’s is considering purchasing $697,400 of equipment for a four-year project. The equipment falls in the five-year MACRS class with annual percentages of .2, .32, .192, .1152, .1152, and .0576 for Years 1 to 6, respectively. At the end of the project the equipment can be sold for an estimated $135,000. The required return is 13.2 percent and the tax rate is 23 percent. Assuming no bonus depreciation is taken, what is the amount of the aftertax salvage value of the equipment?