17. A company is considering a 6-year project that requires an initial outlay of $28,000. The project

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17. A company is considering a 6-year project that requires an initial outlay of $28,000. The project engineer has estimated that the operating cash flows will be $5,000 in year 1, $5,000 in year 2, $7,000 in year 3, $7,000 in year 4, $7,000 in year 5, and $7,000 in year 6. At the end of the project, the equipment will be fully depreciated, classified as 5-year property under MACRS. The project engineer believes the equipment can be sold for $6,000 at the end of the project. If the tax rate is 40% and the required rate of return is 18%, what is the net present value (NPV) of this project? (Answer to the nearest dollar.)

18. A company is considering a 3-year project that requires an initial installed equipment cost of $10,000. The project engineer has estimated that the operating cash flows will be $5,000 in year 1, $7,000 in year 2, and $7,000 in year 3. The new machine will also require a parts inventory of $2,000 at the beginning of the project (assume this inventory can be sold for cost at the end of the project). It is also estimated that the equipment can be sold as salvage for an after tax salvage cash flow of $4,000 at the end of the project. If the tax rate is 35% and the required rate of return is 18%, what is the net present value (NPV) of this project? (Answer to the nearest dollar.)

21. A company is considering a 5-year project that opens a new product line and requires an initial outlay of $80,000. The assumed selling price is $95 per unit, and the variable cost is $56 per unit. Fixed costs not including depreciation are $20,000 per year. Assume depreciation is calculated using stright-line down to zero salvage value. If the required rate of return is 10% per year, what is the accounting break-even point? (Answer to the nearest whole unit.)

23. A company is considering a 5-year project that opens a new product line and requires an initial outlay of $84,000. The assumed selling price is $92 per unit, and the variable cost is $58 per unit. Fixed costs not including depreciation are $19,000 per year. Assume depreciation is calculated using stright-line down to zero salvage value. If the required rate of return is 10% per year, what is the financial break-even point? (Answer to the nearest whole unit.) 25. After some study of the economy, your forecast for next year is that a boom economy has a 30% chance of occurring, a neutral economy 50%, and a bust economy a 20% chance of occurring. You also estimate that a certain stock would have a return of 32% in a boom economy next year, 22% in a neutral economy , and -15% in a bust economy. The risk-free rate is 4.8%. What is the expected return for this stock next year? (Answer to the nearest tenth of a percent, but do not use a percent sign).

	Probability	Return

Boom Economy	30%	32%
Neutral Economy	50%	22%
Bust Economy	20%	-15%

Risk-Free Rate = 4.8%

27. After studying the economy, you forecast that there is a 70% chance of a good economy next year and a 30% chance of a poor economy. If the economy is good, you estimate that a stock you have been following would have a 12% return. Likewise, if the economy is poor, you estimate a -16% return for that same stock. The risk-free rate is 4.5%. What is the standard deviation of the expected returns for this stock? (Answer to the nearest tenth of a percent, but do not use a percent sign).

	Probability	Return

Good Economy	70%	12%
Poor Economy	30%	-16%

Risk-Free Rate = 4.5

35. Suppose you are trying to estimate the after tax cost of debt for a firm as part of the calculation of the Weighted Average Cost of Capital (WACC). The corporate tax rate for this firm is 31%. The firm's bonds pay interest semiannually with a 6.2% coupon rate and have a maturity of 16 years. If the current price of the bonds is $1,045.22, what is the after tax cost of debt for this firm? (Answer to the nearest tenth of a percent, e.g. 12.3%, but do not use a percent sign).

37. The current stock price for a company is $42 per share, and there are 6 million shares outstanding. This firm also has 260,000 bonds outstanding, which pay interest semiannually. If these bonds have a coupon interest rate of 6%, 30 years to maturity, a face value of $1,000, and an annual yield to maturity of 7%, what is the total market value of this firm? (Answer to the nearest dollar, but do not use a dollar sign).