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A famous quarterback just signed a contract for $11.6 million

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A famous quarterback just signed a contract for $11.6 million, providing $3.5 million a year for 4 years. A less

famous receiver signed a contract for $10.6 million, providing $3 million now and $3.2 million a year for 4 years. The interest rate is 8%.

a. What is the PV of the quarterback’s contract? (Do not round intermediate calculations. Enter your answer in millions rounded to 2 decimal places.)

b. What is the PV of the receiver’s contract? (Do not round intermediate calculations. Enter your answer in millions rounded to 2 decimal places.)

 
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Consider three bonds with 5.70% coupon rates

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Consider three bonds with 5.70% coupon rates, all making annual coupon payments

and all selling at face value. The short-term bond has a maturity of 4 years, the intermediate-term bond has a maturity of 8 years, and the long-term bond has a maturity of 30 years.

a. What will be the price of the 4-year bond if its yield increases to 6.70%? (Do not round intermediate calculations. Round your answers to 2 decimal places.)

b. What will be the price of the 8-year bond if its yield increases to 6.70%? (Do not round intermediate calculations. Round your answers to 2 decimal places.)

c. What will be the price of the 30-year bond if its yield increases to 6.70%? (Do not round intermediate calculations. Round your answers to 2 decimal places.)

 
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The following are the cash flows of two projects

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1) The following are the cash flows of two projects: Year Project A Project B0 (310)

(310)

1 140 210

2 140 210

3 140 210

4 140

a. If the opportunity cost of capital is 10%, calculate the NPV for both projects. (Do not round intermediate calculations. Round your answers to 2 decimal places.)

Division a

Division b

2)

The following are the cash flows of two projects:

Year Project A Project B

0 (270) (270)

1 150 170

2 150 170

3 150 170

4 150

a. Calculate the NPV for both projects if the discount rate is 12%. (Do not round intermediate calculations. Round your answers to 2 decimal places.)

Project A

Project b

4)

The following are the cash flows of two projects:

Year Project A Project B

0 – 220 -220

1 100 120

2 100 120

3 100 120

4 100

What is the payback period of each project in years? (Round your answers to 1 decimal place.)

Project A

Project B

5)

A project that costs $4,150 to install will provide annual cash flows of $1,400 for each of the next 6 years.

a. What is NPV if the discount rate is 15%? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

b. How high can the discount rate be before you would reject the project? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)

 
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cash flows

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6) A new computer system will require an initial outlay of $19,000, but it will increase the firm’s cash flows by

$3,800 a year for each of the next 8 years.

– Calculate the NPV and decide if the system is worth installing if the required rate of return is 9%. (Negative amount should be indicated by a minus sign. Do not round intermediate calculations. Round your answers to 2 decimal places.)

– Calculate the NPV and decide if the system is worth installing if the required rate of return is 14%. 

7) Here are the cash flows for a project under consideration:

C0 C1 C2 −$7,230 +$5,100 +$18,720 

a. Calculate the project’s net present value for discount rates of 0, 50%, and 100%. 

0%

50%

100%

b. What is the IRR of the project? (Do not round intermediate calculations. Enter your answer as a whole percent.)

8) If you insulate your office for $27,000, you will save $2,700 a year in heating expenses. These savings will last forever.

a. What is the NPV of the investment when the cost of capital is 6%? 10%?

6%

10%

b. What is the IRR of the investment? (Enter your answer as a whole percent.)

What is the payback period on this investment?

9)

Here are the expected cash flows for three projects:

 Project Year 0 1 2 3 4

A -6900 +1475 +1475 +3950 0

B -2900 0 +2900 +2950 +3950

C -6900 +1475 +1475 +3950 +5950

. What is the payback period on each of the projects?

 a

b

c

If you use a cutoff period of 2 years, which projects would you accept?

  • Project A
  • Project B
  • Project C
  • Project A and Project B
  • Project B and Project C
  • Project A and Project C
  • Projects A, B, and C
  • None

c. If you use a cutoff period of 3 years, which projects would you accept?

  • Project A
  • Project B
  • Project C
  • Project A and Project B
  • Project B and Project C
  • Project A and Project C
  • Projects A, B, and C
  • None

1. If the opportunity cost of capital is 12%, calculate the NPV for projects A, B, and C. (Negative amounts should be indicated by a minus sign. Do not round intermediate calculations. Round your answers to 2 decimal places.)

-2. Which projects have positive NPVs?

  • Project A
  • Project B
  • Project C
  • Project A and Project B
  • Project B and Project C
  • Project A and Project C
  • Projects A, B, and C
  • None
 
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