FIN 306 Corporate Finance Midterm Exam | Actual Questions and Answers Latest Updated 2026/2027 (Graded A+)- Wilmington University

FIN 306 Corporate Finance Midterm Exam | Actual Questions
and Answers Latest Updated (Graded A+)-
Wilmington University


1. What is the payback for a project that has anticipated cash inflows of $10,000 for 5 years and a
cost of $22,000?
a. Payback = Cost / Profit
22,,000 = 2.2 years

2. Good old XYZcorp is considering two mutually exclusive projects, A & B in order to expand their
product line. After letting the cost accountants out of their cages, it was determined that project
A’s initial investment must be $42,400, while project be will cost $60,000.

Project A has projected cash inflows of $25,000 per year for three years. Project B’s inflows are
more variable: $10,000 in year 1; $30,000 in year 2; and $40,000 in its final year.

You have determined the following:
The Prime is 7%, LIBOR is 6%. The firm’s cost of capital is 12%.

Using NPV analysis, if the NPV for project B = + $1,320, which project do you prefer?
a. NPV = CF (PVIFA r,t) – CFO
Project A
NPV = 25,000 (PVIFA 12,3) – 42,400
NPV = 25,000 (2.402) – 42,400
NPV = 60,050 – 42,400
NPV = 17,650
17,650 > 1,320
Project A has the higher NPV, so it is preferred.

3. Given the information for project A in problem P-2, what is this project’s IRR?
a. IRR = 0 = CF (PVIFA r,t) – CFO
Solve for r
IRR = 0 = 25,000 (PVIFA r,3) – 42,400
+42,400 +42,400
42,400 = 25,000 (PVIFA r,3)
/25,000 /25,000
1.696 = (PVIFA r,3)
IRR = 35%

4. Assuming a target capital structure of:
40% debt
20% preferred stock
40% common equity