In order to help you through college, your parents just deposited $25,000 into a bank account paying 5% interest. Starting tomorrow, you plan to withdraw equal amounts from the account at the beginning of each of the next four years. What is the MOST you can withdraw annually?

Given the following information, what is the firm’s weighted average cost of capital? Market value of equity = $60 million; market value of debt = $20 million; cost of equity = 15%; cost of debt = 5%; equity beta = 3.1; tax rate = 35%.

An investment earned the following returns for the last four years: –30%, +28%, +15%, and +7%. What is the variance of returns for this investment?

You have discovered from looking at news announcements on the Wall Street Journal website that if you buy the stock of a firm on the day the firm announces that it has higher than expected earnings, you make money every time in the following week! This is clearly a violation of the _____ of market efficiency.

A project requires an initial investment of $9 million. The target D/E ratio is 0.60. Flotation costs for equity are 7% and flotation costs for debt are 3%. What is the true cost (in dollars) of the project when you consider flotation costs?

What is the market value of a bond that will pay a total of ten semi-annual coupon payments of $70 each over the remainder of its life? Assume the bond has a $1,000 face value and a 6% yield to maturity (APR).

What is the future value at the end of year 4 of the following set of cash flows? Assume an interest rate of 7%. Year                                 1                2                3                4          Cash Flow                    +$900         -$900         +$800           -800

According to the CAPM, what is the expected return on asset A if it has a beta of 1.2, the expected market risk premium is 15%, and the T-bill rate is 1%?

According to the CAPM, what is the expected return on asset A if it has a beta of 2.5, the expected market return is 7%, and the T-bill rate is 1%?

Suppose that your firm has a cost of equity of 12% and a cost of debt of 6%. If the target debt/equity ratio is 0.60, and the tax rate is 30%, what is the firm’s weighted average cost of capital (WACC)?