1.    Suppose your firm is considering investing in a project with the cash flows shown below, that the required rate of return on projects of this risk class is 7 percent, and that the maximum allowable payback and discounted payback statistics for the project are 3.5 and 4.5 years, respectively.

 

Time: 0 1 2 3 4 5 6

Cash flow -$5,100 $1,300 $2,500 $1,700 $1,700 $1,500 $1,300

Use the MIRR decision rule to evaluate this project. (Do not round intermediate calculations. Round your final answer to 2 decimal places.)

 

MIRR_______ % 

2.    Compute the discounted payback statistic for Project D if the appropriate cost of capital is 11 percent and the maximum allowable discounted payback is four years. (Do not round intermediate calculations. Round your final answer to 2 decimal places. If the project does not pay back, then enter a "0" (zero).)

  

 

Project D

Time: 0 1 2 3 4 5

Cash flow -$11,700 $3,420 $4,320 $1,660 $0 $1,140

 

Discounted payback period___________

  

 

3.    Compute the IRR for Project F. The appropriate cost of capital is 11 percent. (Do not round intermediate calculations. Round your final answer to 2 decimal places.)

   

Project F

Time: 0 1 2 3 4

Cash flow -$11,400 $3,550 $4,380 $1,720 $2,350

 

 IRR ______% 

 

 

4.    Compute the NPV for Project K if the appropriate cost of capital is 5 percent. (Negative amount should be indicated by a minus sign. Do not round intermediate calculations. Round your final answer to 2 decimal places.)

   

Project K

 Time: 0 1 2 3 4 5

Cash flow -$11,400 $5,700 $6,700 $6,700 $5,700 -$14,400

 

NPV $_____ 

5.     Suppose that Dunn Industries has annual sales of $4.05 million, cost of goods sold of $1,640,000, average inventories of $1,106,000, and average accounts receivable of $740,000. Assume that all of Dunn's sales are on credit.

 

What will be the firm's operating cycle? (Use 365 days a year. Do not round intermediate calculations. Round your final answer to 2 decimal places.)

 

  Operating cycle _____days

6. What interest rate would make it worthwhile to incur a compensating balance of $16,000 in order to get a 0.65 percent lower interest rate on a 2 year, pure discount loan of $235,000? (Negative amount should be indicated by a minus sign. Do not round intermediate calculations. Round your final answer to 2 decimal places.)

 

  Interest rate _____%

 % 

7.    JohnBoy Industries has a cash balance of $50,000, accounts payable of $130,000, inventory of $180,000, accounts receivable of $215,000, notes payable of $125,000, and accrued wages and taxes of $39,500.

How much net working capital does the firm need to fund?

  Net working capital funding need $_______

8.    Watkins Resources faces a smooth annual demand for cash of $1.60 million, incurs transaction costs of $85 every time the firm sells marketable securities, and can earn 4.7 percent on its marketable securities.

 

What will be its optimal cash replenishment level? (Enter your answer in dollars not in millions. Round your answer to 2 decimal places.)

 

  Optimal cash $_______