1.   You are analyzing aproject based on its timeline and the expected cash flows. The project, which is expected to last 10 years, will produce an NPV of $275,000 with the discount rate of 12.20% pa. The expected cash flows in the first five years are $120,000 per year, and they are $150,000 in the second five years (i.e., Years 6 to 10). Based on this information, what is the initial investment of this project?

a.   $512,170 b.   $458,030 c.   $470,050 d.   $492,880 e.   $439,670

2.   Imagine a project for which you need make an initial investment of $250,000 today. The project’s first year cash inflow is $40,000 and the annual cash flows will grow 2% per year. If the project has the life of eight years, at what discount rate will you be indifferent between accepting and rejecting the project?

a.   5.84% b.   6.22% c.    6.70% d.   7.09% e.   7.45%

3.   You want to buy your dream car for $100,000 today. You have only $35,000 to pay for the car, so you are looking for a loan to finance the rest of the car purchase. Bank Y has the following loan offer for you: a four-year loan with monthly payments at the end of each month, and an APR of 9.08%. Based on this information, what are the monthly payments of this loan?

a.   $1,673 b.   $1,649 c.   $1,620 d.   $1,601 e.   $1,587

4.   Imagine a loan that has quarterly payments for the next three years. If the loan amount is $230,000 and the APR is 6.80%, what will be the quarterly payments?

a.   $7,105   b.   $21,350 c.   $7,280   d.   $21,875

5.   You are a senior analyst of a  mutual fund, and you are assigned to write a report on a stock. The stock is expected to pay a dividend of $3.00 per share next year, and you believe that the dividends will grow at the rate of 5% per year. If the annual required rate of return is 9.83%, how much do you expect to sell this stock at the end of year 2?

a.   $68.48 b.   $73.55 c.   $71.90 d.   $65.77 e.   $75.12