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A firm with a 9.5 percent cost of capital is considering a project for this year’s capital budget.  The project’s expected after-tax cash flows are as follows: Year: 0 1 2 3 4 Cash flow: -$14,000 $4,800 $5,300 $5,000 $5,200 Calculate the project’s internal rate of return (IRR).

A firm with a 9 percent cost of capital is considering a project for this year’s capital budget.  The project’s expected after-tax cash flows are as follows: Year: 0 1 2 3 4 Cash flow: -$7,000 $2,500 $3,200 $3,400 $2,500 Calculate the project’s profitability index (PI).

If a firm’s beta is 1.3, the risk-free rate is 5%, and the expected return on the market is 9%, what will be the firm’s cost of equity using the CAPM approach?

If the inflation increases, then _____________; If average investor becomes more risk averse, then ___________________.

A firm with a 10 percent cost of capital is considering a project for this year’s capital budget.  The project’s expected after-tax cash flows are as follows: Year: 0 1 2 3 4 Cash flow: -$14,000 $6,900 $4,600 $6,200 $5,900 Calculate the project’s profitability index (PI).

Li & Sons’ common stock currently trades at $70 a share.  It is expected to pay an annual dividend of $2.45 a share at the end of the year (D1 = $2.45), and the constant growth rate is 7.9 percent a year.  What is the company’s cost of common equity if all of its equity comes from retained earnings?

Helen recently received a credit card with a nominal interest rate of 21 percent.  With the card, she purchased some new clothes for $450.  The minimum payment on the card is only $15 per month.  If Helen makes the minimum monthly payment and makes no other charges, how long will it be before she pays off the card?

The coupon rate of a bond equals:

A firm’s bonds have a maturity of 19 years with a $1,000 face value, a 13 percent semiannual coupon, are callable in 5 years at $1,095, and currently sell at a price of $1,185.  What is their yield to call (YTC)?

An investment will pay $900 at the end of each of the next 3 years, $1,100 at the end of Year 4, and $1,400 at the end of Year 5.  What is its present value if other investments of equal risk earn 8 percent annually?