Subject: Business    / Finance
Question

1. You have a $66,743 portfolio that consists of $15,493 invested in Stock A, $18,959 invested in Stock B, $5,384 invested in Stock C, and the remainder in Stock D. The portfolio has a return of 21 percent. The return for Stock A is 14.1 percent, for Stock B is 31.6 percent, and for Stock C is 12.1 percent. What is the return for Stock D?

2. What is the project’s initial investment outlay based on the following information: The machinery could be purchased for $36,673. Shipping and installation costs would cost another $4,871. The project would require an initial investment in net working capital of $5,551. The company’s tax rate is 30%

3. A project has an initial requirement of $77,167 for equipment.The equipment will be depreciated to a zero book value over the 5-year life of the project.The investment in net working capital will be $12,826.All of the net working capital will be recouped at the end of the 5 years. The equipment will have an estimated salvage value of $17,008. The annual operating cash flow is $38,680. The cost of capital is 14 percent. What is the project’s net present value if the tax rate is 21 percent?

4. You have invested $37,835 portfolio in three securities. The three securities comprise of the risk-free asset, Stock A, and Stock B. The beta of stock A is 2.3 while the beta of stock B is 0.7. 39% of the portfolio is invested in the risk-free security. What is the dollar amount invested in stock B if the beta of the portfolio is 1.3?

5. ABC Inc. is considering an investment of $1,409 million with after-tax cash inflows of $287 million per year for six years and an additional after-tax salvage value of 41 million in Year 6. The required rate of return is 13%. What is the investment’s Profitability Index (PI)?

6.ABC Company purchased a new machinery 4 years ago for $64,613. Today, it is selling this equipment for $13,284. What is the after-tax salvage value if the tax rate is 24 percent?

The MACRS allowance percentages are as follows, commencing with year one: 20.00, 32.00, 19.20, 11.52, 11.52, and 5.76 percent.

7.The risk-free rate is 5.3%, the market risk premium is 6.9%, and the stock’s beta is 0.64. What is the required rate of return on the stock, E(Ri)?

Use the CAPM equation.

8. A 12-year project is expected to generate annual sales of $294,798, variable costs of $37,508, and fixed costs of $59,154. The annual depreciation is $29,847 and the tax rate is 34 percent. What is the annual operating cash flow?

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