Your finance text book sold 50,500 copies in its first year. The publishing company expects the sales to grow at a rate of 20.0 percent for the next three years, and by 12.0 percent in the fourth year. Calculate the total number of copies that the publisher expects to sell in year 3 and 4. (If you solve this problem with algebra round intermediate calculations to 6 decimal places, in all cases round your final answers to the nearest whole number.)
Number of copies sold after 3 years 


Number of copies sold in the fourth year 

Find the present value of $5,200 under each of the following rates and periods.
(If you solve this problem with algebra round intermediate calculations to 6 decimal places, in all cases round your final answer to the nearest penny.)
a. 8.9 percent compounded monthly for five years.
b. 6.6 percent compounded quarterly for eight years.
c. 4.3 percent compounded daily for four years.
d. 5.7 percent compounded continuously for three years.
Trigen Corp. management will invest cash flows of $971,675, $1,043,247, $923,044, $818,400, $1,239,644, and $1,617,848 in research and development over the next six years. If the appropriate interest rate is 6.57 percent, what is the future value of these investment cash flows six years from today? (Round answer to 2 decimal places, e.g. 15.25.)
You wrote a piece of software that does a better job of allowing computers to network than any other program designed for this purpose. A large networking company wants to incorporate your software into their systems and is offering to pay you $524,000 today, plus $524,000 at the end of each of the following six years for permission to do this. If the appropriate interest rate is 6 percent, what is the present value of the cash flow stream that the company is offering you? (Round answer to the nearest whole dollar, e.g. 5,275.)
Problem 7.16
Barbara is considering investing in a stock and is aware that the return on that investment is particularly sensitive to how the economy is performing. Her analysis suggests that four states of the economy can affect the return on the investment. Using the table of returns and probabilities below, find
Boom 
0.2 
25.00% 
Good 
0.6 
15.00% 
Level 
0.1 
10.00% 
Slump 
0.1 
5.00% 
IE

















What is the expected return on Barbara’s investment? (Round answer to 3 decimal places, e.g. 0.076.)
Expected return 



























Trevor Price bought 10year bonds issued by Harvest Foods five years ago for $1,007.53. The bonds make semiannual coupon payments at a rate of 8.4 percent. If the current price of the bonds is $1,072.66, what is the yield that Trevor would earn by selling the bonds today? (Round intermediate calculations to 4 decimal places, e.g. 1.2514 and final answer to 2 decimal places, e.g. 15.25%.)
Effective annual yield 

% 
The First Bank of Ellicott City has issued perpetual preferred stock with a $100 par value. The bank pays a quarterly dividend of $1.65 on this stock. What is the current price of this preferred stock given a required rate of return of 11.0 percent? (Round answer to 2 decimal places, e.g. 15.25.)
Briarcrest Condiments is a spicemaking firm. Recently, it developed a new process for producing spices. The process requires new machinery that would cost $1,968,450. have a life of five years, and would produce the cash flows shown in the following table.
Year 
Cash Flow 
1 
$512,496 
2 
242,637 
3 
814,558 
4 
887,225 
5 
712,642 
What is the NPV if the discount rate is 15.9 percent? (Enter negative amounts using negative sign e.g. 45.25. Round answer to 2 decimal places, e.g. 15.25.)
Archer Daniels Midland Company is considering buying a new farm that it plans to operate for 10 years. The farm will require an initial investment of $12.00 million. This investment will consist of $2.00 million for land and $10.00 million for trucks and other equipment. The land, all trucks, and all other equipment is expected to be sold at the end of 10 years at a price of $5.00 million, $2.00 million above book value. The farm is expected to produce revenue of $2.00 million each year, and annual cash flow from operations equals $1.80 million. The marginal tax rate is 35 percent, and the appropriate discount rate is 10 percent. Calculate the NPV of this investment. (Round intermediate calculations and final answer to 2 decimal places, e.g. 15.25.)
The project should be 

accepted rejected 
. 
Bell Mountain Vineyards is considering updating its current manual accounting system with a highend electronic system. While the new accounting system would save the company money, the cost of the system continues to decline. The Bell Mountain’s opportunity cost of capital is 10 percent, and the costs and values of investments made at different times in the future are as follows:
Year 
Cost 
Value of Future Savings (at time of purchase) 

0 
$5,000 
$7,000 


1 
4,500 
7,000 


2 
4,000 
7,000 


3 
3,600 
7,000 


4 
3,300 
7,000 


5 
3,100 
7,000 


Calculate the NPV of each choice. (Round answers to the nearest whole dollar, e.g. 5,275.)
The NPV of each choice is:
NPV_{0} = $
NPV_{1} = $
NPV_{2} = $
NPV_{3} = $
NPV_{4} = $
Chip’s Home Brew Whiskey management forecasts that if the firm sells each bottle of SnakeBite for $20, then the demand for the product will be 15,000 bottles per year, whereas sales will be 90 percent as high if the price is raised 10 percent. Chip’s variable cost per bottle is $10, and the total fixed cash cost for the year is $100,000. Depreciation and amortization charges are $20,000, and the firm has a 30 percent marginal tax rate. Management anticipates an increased working capital need of $3,000 for the year. What will be the effect of the price increase on the firm’s FCF for the year? (Round answers to nearest whole dollar, e.g. 5,275.)
At $20 per bottle the Chip’s FCF is $
and at the new price Chip’s FCF is $
. 
Capital Co. has a capital structure, based on current market values, that consists of 50 percent debt, 10 percent preferred stock, and 40 percent common stock. If the returns required by investors are 8 percent, 10 percent, and 15 percent for the debt, preferred stock, and common stock, respectively, what is Capital’s aftertax WACC? Assume that the firm’s marginal tax rate is 40 percent. (Round intermediate calculations to 4 decimal places, e.g. 1.2514 and final answer to 2 decimal places, e.g. 15.25%.)