Q1. Big bike Inc. is considering a new project whose data are shown below.The equipment that will be used has a 3-year class life and will be depreciated by the MACRS depreciation system.Revenues and Cash operating costs are expected to be constant over the project's 10-year life.What is the Year 1 after-tax net operating cash flow?

Equipment cost (depreciable basis) $75,000

Sales revenues, each year $70,000

Cash operating costs $29,000

Tax rate 20.0%

Q2. Henly Inc. believes the following probability distribution exists for its stock.What is the standard deviation of return on the company's stock?

State of the Economy Probability of State Occurring Stock's Expected Return

Boom 0.25 35%

Normal 0.45 13%

Recession 0.30 -26%

Q3. Marina Corporation just paid a dividend of $1.95 per share, and that dividend is expected to grow at a constant rate of 7.00% per year in the future.The company's beta is 2.75, the required return on the market is 10.50%, and the risk-free rate is 3.00%.What is the intrinsic value for Marina's stock?

Q4. Prima Inc. forecasts that its free cash flow in the coming year, i.e., at t = 1, will be -$15 million (negative), but its FCF at t = 2 will be $30 million.After Year 2, FCF is expected to grow at a constant rate of 3% forever.If the weighted average cost of capital is 19%, what is the firm's value of operations, in millions?

Q5. Zisco Inc. forecasts the free cash flows (in millions) shown below.If the weighted average cost of capital is 17% and the free cash flows are expected to continue growing at the same rate after Year 3 as from Year 2 to Year 3, what is the Year 0 value of operations, in millions?

Year Free Cash Flow

1$ (22.00)

2$ 42.00

3$ 45.00