1. Parker & Stone, Incorporated, is looking at setting up a new manufacturing plant in South Park to produce garden tools. The company bought some land six years ago for $8.3 million in anticipation of using it as a warehouse and distribution site, but the company has since decided to rent facilities elsewhere. If the land were sold today, the company would net $11.1 million. The company now wants to build its new manufacturing plant on this land; the plant will cost $22.3 million to build, and the site requires $980,000 worth of grading before it is suitable for construction. What is the proper cash flow amount to use as the initial investment in fixed assets when evaluating this project?

2.Sales-629500

costs-379300

depreciation-130900

EBIT- to answer

taxes (23%)- to answer

net income- to answe

ocf- to answer

depreciation tax shield- to answer

3. Youve observed the following returns on Pine Computers stock over the past five years: 27 percent, 15 percent, 33 percent, 3 percent, and 22 percent. The average inflation rate over this period was 3.30 percent and the average T-bill rate over the period was 4.3 percent.

a)What was the average real return on the stock?

b)What was the average nominal risk premium on the stock?

4.Suppose the returns on an asset are normally distributed. The historical average annual return for the asset was 5.9 percent and the standard deviation was 10.5 percent.

a)What is the probability that your return on this asset will be less than 7.3 percent in a given year? Use the NORMDIST function in Excel to answer this question.

b)What range of returns would you expect to see 95 percent of the time?

c)What range of returns would you expect to see 99 percent of the time?