You are considering a project that will cost you $16,000,000 initially. Your cost of capital for this project is 8%. There is a 80% probability that the project will generate cash flows of $2,000,000 per year in perpetuity, and a 20% probability that the project will generate cash flows of $500,000 per year in perpetuity. If you could sell the project at the end of the first year for $, what is the value of this abandonment option today? Enter your answer in dollars and cents. For example, $123,456 would be 123,456.

You are a subcontractor bidding on a contract to provide car batteries to be sold at WalMart stores throughout Ohio for three years. You wish to enter a bid price that makes your NPV exactly $0. You have completed Steps 1-3 of the process explained at the end of the Chapter 11 slides and you find that you need to generate an annual OCF of $275,587.20 to get exactly NPV=0. Solve for the price per battery that you need to charge using the following information:  Quantity: batteries per year Variable costs: $37 per battery Fixed costs: $585,000 per year Tax rate: 21% Depreciation: $200,000 per year Enter your answer in dollars and cents.

A firm will have free cash flows next year (FCF1) of $20,000,000. The growth rate in FCF will be a constant 3% per year. The firm’s cost of debt, rD, is 5% and its cost of equity, rS, is 10%. The weights of debt and equity are 0.5 and 0.5. The firm’s tax rate is 21%. Calculate the value of the firm’s operations using the pre-tax WACC and the after-tax WACC. The difference will be the firm’s PV(ITS). What is this difference? Round your answer to the nearest dollar.

Your firm is evaluating a project that will generate the following cash flows next year with the following probabilities: Cash Flow at t=1 Probability Good Case $600M 0.75 Bad Case $200M 0.25 You have debt due in one year in the amount of $250M. In case of a default, % of the cash flows will be lost due to bankruptcy costs. Assume the proper discount rate for all cash flows is %. How much are expected bankruptcy costs today? You can either solve for expected bankruptcy costs directly, or by calculating how much less will your levered firm (V-L) be worth today compared to an unlevered firm (V-U)? Enter your answer in MILLIONS of dollars; if your answer is $67.8935 MILLION, enter 67.89.

Which statement most represents the fallacy listed below: “Since crime has gone up dramatically, if we don’t buy this new security system right now, our house is definitely going to get broken into!”

What is a common way statistics can be deceptive? 

What does the concept of “rival causes” refer to in critical thinking? 

Which of the following questions would help uncover value assumptions?

Instructions: You have 3 hours (8PM – 11PM) to complete the exam.  This is a closed book and closed notes exam. Only a physical scientific calculator is allowed. No graphing calculators, electronic devices, books, notes, or other reference materials are permitted during the exam. You may only use a pen or pencil and blank scratch paper. Write all answers clearly in the space provided and show all necessary work to receive full credit. If you need additional space or prefer to write your solutions on separate sheets, you may do so. In that case, clearly label each sheet with your name and the corresponding question number. After completing the questions, scan your solutions and upload them to Canvas as a SINGLE .pdf file. You may use your phone to scan your work. Then, either share the file with your computer or email it to yourself in order to upload it. Ensure that all pages are legible, properly ordered, and clearly labeled with your name. Now you can start. Exam 2 – make up.pdf

What is one ecological mechanism or process responsible for the high species richness of prey species at intermediate levels of consumer abundance, and how does that mechanism function?