IVY Software, Corporate Finance Final,
Finance 501, PE 2, Business Finance Final,
Finance, Finance 301, FIN 3310 Final Exam
Quizzes, Fin 320 Final
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2026-2027 Includes Frequently Tested
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1. Alpha Industries is considering a project with an initial cost of $9.7 million. The
project will produce cash inflows of $1.67 million per year for 9 years. The
project has the same risk as the firm. The firm has a pretax cost of debt of 6.12
percent and a cost of equity of 11.61 percent. The debt-equity ratio is .77 and
the tax rate is 40 percent. What is the net present value of the project? -
ANSWER WACC = (1/1.77)(11.61) + (.77/1.77)(6.12%)(1 − .40)
WACC = 8.16%
NPV = −$9,700,000 + $1,670,000(PVIFA8.16%,9)
NPV = $664,645
,2. There is a project with the following cash flows $25,850 7,500 8,600 7,350
7,950 7,100
What is the payback period? - ANSWER 3.3 years
0----(250,850)
*add years until you find the year that it will make it above 0
(250,850)+7500+8600+7350=-2400
then divide them
2400/7950=0.03019
add the year the last was from
7350 was in year 3
3+0.03019=3.3
3. Take It All Away has a cost of equity of 11.14 percent, a pretax cost of debt of
5.34 percent, and a tax rate of 35 percent. The company's capital structure
consists of 66 percent debt on a book value basis, but debt is 32 percent of the
company's value on a market value basis. What is the company's WACC? -
ANSWER WACC = .68(11.14%) + .32(5.34%)(1 − .35)
WACC = 8.69%
WACC = .68(11.14%) + .32(5.34%)(1 − .35)
WACC = 8.69%
4. A company purchased an asset for $3,650,000 that will be used in a 3-year
project. The asset is in the 3-year MACRS class. The depreciation percentage
each year is 33.33 percent, 44.45 percent, and 14.81 percent, respectively.
What is the book value of the equipment at the end of the project? - ANSWER
Book value = $3,650,000 − 3,650,000(.3333 + .4445 + .1481)
,Book value = $270,465
5. The Two Dollar Store has a cost of equity of 10.5 percent, the YTM on the
company's bonds is 5.1 percent, and the tax rate is 35 percent. If the
company's debt-equity ratio is .40, what is the weighted average cost of
capital? - ANSWER WACC = (1/1.40)(10.5%) + (.40/1.40)(5.1%)(1 − .35)
WACC = 8.45%
6. Rossdale Co. stock currently sells for $73.09 per share and has a beta of 1.23.
The market risk premium is 7.00 percent and the risk-free rate is 2.86 percent
annually. The company just paid a dividend of $4.33 per share, which it has
pledged to increase at an annual rate of 3.35 percent indefinitely. What is your
best estimate of the company's cost of equity - ANSWER RE = .0286 +
1.23(.0700)
RE = .1147, or 11.47%
RE = $4.33(1.0335)/$73.09 + .0335
RE = .0947, or 9.47%
RE = (11.47% + 9.47)/2
RE = 10.47%
7. You just won the $77.5 million Ultimate Lotto jackpot. Your winnings will be
paid as $3,100,000 per year for the next 25 years. If the appropriate interest
rate is 6.4 percent, what is the value of your windfall? - ANSWER
=$38,165,830.88
windfall=pv, use a negative pmt without fv
n=25
, i/y=6.4
pmt= (3,100,000)
pv=$38,165,830.88
8. A project that will last for 7 years is expected to have equal annual cash flows
of $99,400. If the required return is 8.1 percent, what maximum initial
investment would make the project acceptable? - ANSWER NPV = 0 = Time
0 cash flow + $99,400(PVIFA8.1%, 7)
Time 0 cash flow = $515,747.97
9. Kindzi Co. has preferred stock outstanding that is expected to pay an annual
dividend of $3.90 every year in perpetuity. If the required return is 3.99
percent, what is the current stock price? - ANSWER P0 = $3.90/.0399 =
$97.74
10.Bermuda Cruises issues only common stock and coupon bonds. The firm has a
debt-equity ratio of .81. The cost of equity is 11.9 percent and the pretax cost
of debt is 6.8 percent. What is the capital structure weight of the firm's equity
if the firm's tax rate is 40 percent? - ANSWER XE = 1/(1 + .81)
XE = .5525
Use the following information to answer this question.
Windswept, Inc.2017 Income Statement
($ in millions)
Finance 501, PE 2, Business Finance Final,
Finance, Finance 301, FIN 3310 Final Exam
Quizzes, Fin 320 Final
Comprehensive Resource To Help You Ace
2026-2027 Includes Frequently Tested
Questions With ELABORATED 100% Correct
COMPLETE SOLUTIONS
Guaranteed Pass First Attempt!!
Current Update!!
1. Alpha Industries is considering a project with an initial cost of $9.7 million. The
project will produce cash inflows of $1.67 million per year for 9 years. The
project has the same risk as the firm. The firm has a pretax cost of debt of 6.12
percent and a cost of equity of 11.61 percent. The debt-equity ratio is .77 and
the tax rate is 40 percent. What is the net present value of the project? -
ANSWER WACC = (1/1.77)(11.61) + (.77/1.77)(6.12%)(1 − .40)
WACC = 8.16%
NPV = −$9,700,000 + $1,670,000(PVIFA8.16%,9)
NPV = $664,645
,2. There is a project with the following cash flows $25,850 7,500 8,600 7,350
7,950 7,100
What is the payback period? - ANSWER 3.3 years
0----(250,850)
*add years until you find the year that it will make it above 0
(250,850)+7500+8600+7350=-2400
then divide them
2400/7950=0.03019
add the year the last was from
7350 was in year 3
3+0.03019=3.3
3. Take It All Away has a cost of equity of 11.14 percent, a pretax cost of debt of
5.34 percent, and a tax rate of 35 percent. The company's capital structure
consists of 66 percent debt on a book value basis, but debt is 32 percent of the
company's value on a market value basis. What is the company's WACC? -
ANSWER WACC = .68(11.14%) + .32(5.34%)(1 − .35)
WACC = 8.69%
WACC = .68(11.14%) + .32(5.34%)(1 − .35)
WACC = 8.69%
4. A company purchased an asset for $3,650,000 that will be used in a 3-year
project. The asset is in the 3-year MACRS class. The depreciation percentage
each year is 33.33 percent, 44.45 percent, and 14.81 percent, respectively.
What is the book value of the equipment at the end of the project? - ANSWER
Book value = $3,650,000 − 3,650,000(.3333 + .4445 + .1481)
,Book value = $270,465
5. The Two Dollar Store has a cost of equity of 10.5 percent, the YTM on the
company's bonds is 5.1 percent, and the tax rate is 35 percent. If the
company's debt-equity ratio is .40, what is the weighted average cost of
capital? - ANSWER WACC = (1/1.40)(10.5%) + (.40/1.40)(5.1%)(1 − .35)
WACC = 8.45%
6. Rossdale Co. stock currently sells for $73.09 per share and has a beta of 1.23.
The market risk premium is 7.00 percent and the risk-free rate is 2.86 percent
annually. The company just paid a dividend of $4.33 per share, which it has
pledged to increase at an annual rate of 3.35 percent indefinitely. What is your
best estimate of the company's cost of equity - ANSWER RE = .0286 +
1.23(.0700)
RE = .1147, or 11.47%
RE = $4.33(1.0335)/$73.09 + .0335
RE = .0947, or 9.47%
RE = (11.47% + 9.47)/2
RE = 10.47%
7. You just won the $77.5 million Ultimate Lotto jackpot. Your winnings will be
paid as $3,100,000 per year for the next 25 years. If the appropriate interest
rate is 6.4 percent, what is the value of your windfall? - ANSWER
=$38,165,830.88
windfall=pv, use a negative pmt without fv
n=25
, i/y=6.4
pmt= (3,100,000)
pv=$38,165,830.88
8. A project that will last for 7 years is expected to have equal annual cash flows
of $99,400. If the required return is 8.1 percent, what maximum initial
investment would make the project acceptable? - ANSWER NPV = 0 = Time
0 cash flow + $99,400(PVIFA8.1%, 7)
Time 0 cash flow = $515,747.97
9. Kindzi Co. has preferred stock outstanding that is expected to pay an annual
dividend of $3.90 every year in perpetuity. If the required return is 3.99
percent, what is the current stock price? - ANSWER P0 = $3.90/.0399 =
$97.74
10.Bermuda Cruises issues only common stock and coupon bonds. The firm has a
debt-equity ratio of .81. The cost of equity is 11.9 percent and the pretax cost
of debt is 6.8 percent. What is the capital structure weight of the firm's equity
if the firm's tax rate is 40 percent? - ANSWER XE = 1/(1 + .81)
XE = .5525
Use the following information to answer this question.
Windswept, Inc.2017 Income Statement
($ in millions)
