Consider a project that requires an initial investment of $\$ 102,000$ and will produce a single cash flow of $\$ 153,000$ in five years.

a. What is the NPV of this project if the five-year interest rate is $4.9 \%$ (EAR)?

b. What is the NPV of this project if the five-year interest rate is $9.8 \%$ (EAR)?

c. What is the highest five-year interest rate such that this project is still profitable?

Suppose that a company receives 60$\%$ of its orders over the Internet. Suppose that 30$\%$ of the orders received over the Internet are large orders, and 40$\%$ of the orders received by other means are large orders. Out of eight independently placed orders, what is the probability that two will be large orders received over the Internet, two will be small orders received over the Internet, two will be large orders not received over the Internet, and two will be small orders not received over the Internet?

You are enrolling in an MBA program. To pay your tuition, you can either take out a standard student loan (so the interest payments are not tax deductible) an EAR of $5.625 \%$ or you can use tax-deductible home equity loan with an APR (monthly) of $6 \%$. You anticipate being in a very low tax bracket, so your tax rate will be only $15 \%$. Which loan should you use?

You have decided to take your daughter skiing in Utah. The best price you have been able to find for a roundtrip air ticket is $\$ 364$. You notice that you have $20,000$ frequent flier miles that are about to expire, but you need $25,000$ miles to get her a free ticket. The airline offers to sell you $5000$ additional miles for $\$ 0.04$ per mile.

a. Suppose that if you don't use the miles for your daughter's ticket they will become worthless. What should you do?

b. What additional information would your decision depend on if the miles were not expiring? Why?

Anle Corporation has a current price of $\$ 27$, is expected to pay a dividend of $\$ 2$ in one year, and its expected price right after paying that dividend is $\$ 28$.

a. What is Anle's expected dividend yield?

b. What is Anle's expected capital gain rate?

c. What is Anle's equity cost of capital?

Assume that a bond will make payments every six months as shown on the following timeline:

a. What is the maturity of the bond (in years)?

b. What is the coupon rate (in percent)?

c. What is the face value?

Your brother wants to borrow $\$ 10,750$ from you. He has offered to pay you back $\$ 12,750$ in a year. If the cost of capital of this investment opportunity is $12 \%$, what is its NPV? Should you undertake the investment opportunity? Calculate the IRR and use it to determine the maximum deviation allowable in the cost of capital estimate to leave the decision unchanged.

Your grandfather put some money in an account for you on the day you were born. You are now $18$ years old and are allowed to withdraw the money for the first time. The account currently has $\$ 4200$ in it and pays a $12 \%$ interest rate.

a. How much money would be in the account if you left the money there untili your $25$th birthday?

b. What if you left the money in the account until your $65$th birthday?

c. How much money did your grandfather originally put in the account?

You have decided to refinance your mortgage. You plan to borrow whatever is outstanding on your current mortgage. The current monthly payment is $\$ 1991$ and you have made every payment on time. The original term of the mortgage was $30$ years, and the mortgage is exactly four years and eight months old. You have just made your monthly payment. The mortgage interest rate is $5.537 \%$ (APR). How much do you owe on the mortgage today?

Using the term structure in Problem above, what is the present value of an investment that pays $\$ 110$ at the end of each of years $1,2$ , and $3$? If you wanted to value this investment correctly using the annuity formula, which discount rate should you use?

Suppose the risk-free interest rate is $3.9 \%$.

a. Having $\$ 500$ today is equivalent to having what amount in one year?

b. Having $\$ 500$ in one year is equivalent to having what amount today?

c. Which would you prefer, $\$ 500$ today or $\$ 500$ in one year? Does your answer depend on when you need the money? Why or why not?

Access the Yahoo! (ticker: YHOO) 10-K report for the year ended December 31, 2015, filed on February 29, 2016, at SEC.gov. 1. What amount of goodwill is reported on Yahoo!’s balance sheet? What percentage of total assets does its goodwill represent? Is goodwill a major asset for Yahoo!? Explain. 2. Locate Note 5 to its financial statements. Identify the change in goodwill from December 31, 2014, to December 31, 2015. Comment on the change in goodwill over this period. 3. Locate Note 6 to its financial statements. What are the three categories of intangible assets that Yahoo! reports at December 31, 2015? What proportion of total assets do the intangibles represent? 4. What does Yahoo! indicate is the life of “Tradenames, trademarks, and domain names” according to its Note 6?

Capital One is advertising a $60$-month, $6.61 \%$ APR motorcycle loan. If you need to borrow $\$ 11,000$ to purchase your dream Harley Davidson, what will your monthly payment be?

You make monthly payments on your mortgage. It has a quoted APR of $10 \%$ (monthly compounding). What percentage of the outstanding principal do you pay in interest each month?