2. Zellers, Inc. is considering two mutually exclusive projects, A and B. Project A costs $75,000 and is expected to generate $48,000 in year one and $45,000 in year two. Project B cost $80,000 and is evpected to generate $34,000 in year one, $37,000 in year two, $26,000 in year three, and $25,000 in year four. Zellers, Inc.'s required rate of return for these projects is 10%. The net present value for Project B is: a. $18,097 b. $42,000 c. $34,238 d. $21,378 7. A significant disadvantage of the internal rate of return is that: a. It does not give proper weight to all cash flows b. It is expressed as a percentage. c. Does not fully consider the time value of money d. can result in multiple rates of return (more than one IRR) 9. Determine the five-year equivalent annual annuity for the following project if the appropriate discount rate is 16%: initial outflow= $150,000 cash flow year 1= $40,000 cash flow year 2= $90,000 cash flow year 3= $60,000 cash flow year 4= $0 cash flow year 5= $80,000 a. $9,872 b. $8,520 c. $7,058 d. $9,454 14. Increased depreciation expenses affect tax-related cash flow by: a.increasing taxable income, thus increasing taxes b. decreasing taxable income, thus reducing taxes. c. pushing the corporation into a higher tax bracket. d. decreasing taxable income, with no effect on cash flow since depreciation is a non cash expense 15. When terminating a project for capital budgeting purposes, the working capital outlay required at the intiation of the project will: a. not affect the cash flow b. decrease the cash flow because it is an outlay. c. increase the cash flow because it is recaptured. d. decrease the cash flow because it is a historical cost. 20. A firm with positive MVA is ____. a. controlling operating expenses extremely well b. using investments to produce what investors precieve to be positve net present values. c. experiencing monetary volatility acceleration d. likely to have an unhappy group of common stockholders 22. Royal Mediterranean Cruise Line's common stock is selling for $22 per share. The last dividend was $1.20, and dividends are expected to grow at a 6% annual rate. Flotation cost on new stock are 5% of the selling price. What is the cost of Royal's retained earnings? a. 12.09% b. 11.45% c. 11.78% d. 5.73% 23. Cost of capital is: a. the average cost of the firm's assets. b. a hurdle rate set by the board of directors. c. the coupon rate of debt. d. the rate of return that must be earned on additional investment if firm value is to remain unchanged.