Instructions					
											
											
NAME:											
											
											
	To complete the homework assignments in the templates provided:										
											
	1.	The question is provided for each problem. You may need to refer to your textbook for additional information in a few cases.									
											
											
	2.	You will enter the required information into the shaded cells.									
											
	3.	The cells are coded:									
											
		a) T requires a text answer. Essay questions require references; use the textbook.  									
											
		b) C requires a calculation, using Excel formulas or functions. You cannot perform the operation on a calculator and then type the answer in the cell. You will enter the calculation in the cell, and only the final answer will show in the cell. I will be able to review your calculation and correct, if necessary.									
											
											
											
		c) F requires a number only. In some problems, a “Step 1” is added to help you solve the problem.									
											
		d) Formula requires a written formula, not the numbers. For example, the rate of return = [(1 + nominal)/ (1+inflation)]-1, or D (debt) + E (equity) = V (value).									
											
											
	4.	Name your assignment file as "LastnameFirstinitial-BUSN602-Week#", and submit by midnight ET, Day 7.


	Discussion Question 17-1 							
								
	What is meant by capital budgeting? Briefly describe some characteristics of capital budgeting.							
								
								
	Answer:							
								
	T 							
								
								
								
Discussion Question 17-26					
					
"What is a way to keep managers accountable for their capital budgeting forecasts and estimates?
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Answer:					
					
T 					
					
					
					
					
					
					
					
					
					
Problem 17-1			
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Find the NPV and PI of a project that costs $1,500 and returns $800 in Year 1 and $850 in Year 2. Assume the project’s cost of capital is 8 percent.			
			
			
			
			
Answers:			
			
Enter the answers in blue shaded cells			
			
Step 1:			
PV of cash inflows	C		
PV of cash outflows 	F		
			
Step 2:			
NPV 	C		
PI 	C		
			
Problem 17-2			
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Find the NPV and PI of an annuity that pays $500 per year for eight years and costs $2,500. Assume a discount rate of 6 percent.			
			
			
			
Answers:			
			
Enter the answers in blue shaded cells			
			
Step 1:			
PV of cash inflows	C		
PV of cash outflows 	F		
			
Step 2:			
NPV 	C		
PI 	C		
			
			
Discussion Question 18-2					
					
"Explain why determining a firm’s optimum debt/equity mix is important.
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Answer:					
					
T 					
					
					
					
					
					
					
					
					
					
Discussion Question 18-4								
								
How have the Fed’s policies since the 2007-2009 recession affected corporate financing decisions?								
								
								
Answer:								
								
T 								
								
								
								
								
								
								
								
								
								
Problem 18-8				
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The Nutrex Corporation wants to calculate its weighted average cost of capital. Its target capital structure weights are 40 percent long-term debt and 60 percent common equity. The before-tax cost of debt is estimated to be 10 percent and the company is in the 40 percent tax bracket. The current risk-free interest rate is 8 percent on Treasury bills. The expected return on the market is 13 percent and the firm’s stock beta is 1.8.				
				
				
				
"a. What is Nutrex’s cost of debt?
b. Estimate Nutrex’s expected return on common equity using the security market line.                                      c. Calculate the after-tax weighted average cost of capital."				
				
				
				
Answers:				
	Enter the answers in blue shaded cells			
				
		Formula		Calculation
a.	Cost of debt	T		C
				
b.	Expected return on common equity 	T		C
				
c.	After-tax WACC	T		C