Reference no: EM133110842

1. The expected return on the stock of SafeComp is equal to 14% and its beta coefficient is equal to 0.8. Find the expected return on the stock of RiskyComp if its beta coefficient is equal to 1.2 and the risk-free interest rate is 5%

A: 21%
B: 18.5%
C: 9.3%
D: Cannot be determined from available information

2. Find the NPV of the project that requires a $100,000 initial investment, generates $20,000 annual revenue for 10 years starting next year, and requires an additional expense of $10,000 to close the project at the end of the tenth year. Assume the required rate of return is 12%

A: $3004
B: $9785
C: $13004
D: $14157

3. A firm that is expected to pay $3 dividends next year, the dividends are expected to grow at a constant rate of 3% per year, and the current price of the firm's shares is $60. Assume the after-tax cost of debt is 2%. Find the cost of equity.

A: 7%
B: 8%
C:9%
D: 10%

4. Consider a firm that has invested in a 5-year project. It faces a 40% corporate tax rate and its investment belongs to the CCA class with a 30% depreciation rate. A new "take care of equipment" program implemented by the firm allowed it to increase the salvage value of the equipment by $20,000. What was the effect of this program on NPV if the project's discount rate is 12%?

A: $6809
B:$8106
C: $9714
D: $11349

5. Consider a firm that has invested in a 5-year project. It faces a 40% corporate tax rate and its investment belongs to the CCA class with a 30% depreciation rate. By how much the NPV of the project will increase if the firm would be able to negotiate a $20,000 discount on the equipment it bought? Assume that the salvage value of the equipment stays the same. Assume also that the project's discount rate is 12%.

A: $14592
B: $12000
C: $11349
D: $10714