1. a. Calculate (write down a formula) the net present value of the following project for discount rates of 0, 50, and 100 percent:

Cash Flows ($) C0 C1 C2

6,750 4,500 18,000

2. What is the IRR of the project (write down a formula)?

3.Suppose you have the following investment opportunities, but only $90,000 available

for investment. Which projects should you take?

Project NPV Investment

1 5,000 10,000

2 5,000 5,000

3 10,000 90,000

4 15,000 60,000

5 15,000 75,000

6 3,000 15,000

4.Calculate WACC.

Source of capital	Cost	Sum
Loan 1	12%	14000
Loan 2	15%	6000
Equity		20000

Estimate the cost of equity through CAPM. Companys beta is 1.2, market portfolio rate of return is 15%, risk-free rate of return is 7%.

5.What is VaR? How it can be calculated?

6.Construct after-tax cash flows.Working capital is estimated as 20% of sales.

		1	2	3	4	5
Revenues		3000000	3 600000	4200000	4500000	5000000
Operating Expenses
Salaries		300000	330000	360000	390000	400000
Raw Material		1500000	1900000	2200000	2500000	2800000
Depreciation		200000	200000	200000	200000	200000
Operating Income
Taxes (20%)
Operating Income After Taxes
		0	1	2	3	4	5
Capital Expenditure		-10000000
After tax operating Income
Depreciation
Change in Working Capital
After-tax Cash Flows

7. A piece of land produces an income that grows by 5 percent per annum. If the first

years flow is $10,000, what is the value of the land? The interest rate is 10 percent.