1.   You are analyzing a project 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 of $1,620 (at  the end of each month). Based on this information, what is the APR of the loan Bank Y  offers you?

a.   8.47%

b.   8.75%

c.   9.08%

d.   9.33%

e.   9.57%

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 3?

a.   $68.48

b.   $73.55

c.   $71.90

d.   $65.77

e.   $75.12

6.   You are interested in buying a real estate in St. Louis. The property costs $700,000 today. If you buy this property, you will rent it immediately and earn $3,800 per month (paid at the beginning of each month) for the next six years. If your goal is to generate  an annual return of 15%, how much should you be selling this property at the end of year 6?

a.   $1,267,090

b.   $1,185,900

c.   $1,219,580

d.   $1,307,250

7.   Imagine an asset your firm is interested in using. You have two options to acquire/use that asset: You can buy it for $200,000 today or you can lease it for $3,980 per month (paid at the end of each month) for five years. If your firm’s discount rate is 9% per year, which option do you choose and how much do you save in today’s dollar terms?

a.   Buying and you save $5,360

b.   Leasing and you save $5,360

c.    Buying and you save $8,270

d.   Leasing and you save $8,270

8.   You bought a 30-year semi annual coupon bond for $944 today. The face value of the bond is $1,000, and its coupon rate is 8% pa. Under these circumstances, what is the yield to maturity (YTM) of this bond?

a.   7.44%

b.   7.76%

c.   8.00%

d.   8.28%

e.   8.52%