1. What is the NPV of a project that required a net investment of $500,000 and produced net cash flows of $150,000 per year for the next 5 years and $110,000 for the sixth year? Assume the cost of capital is 14%.

(A) $65,077
(B) $392,580
(C) $588,710
(D) $60,920

Calculate the after-tax cost of preferred stock for Tennessee Valley Power Company, which is planning to sell $150 million of $4.25 cumulative preferred stock to the public at a price of $28 per share. Flotation costs are 11%. Tennessee Valley has a marginal income tax rate of 40%.

(A) 17%
(B) 15%
(C) 22%
(D) 8%

IOU, a technology firm, issued a 10% coupon, 20 year to maturity first mortgage bond five years ago. If the current market rate of debt for IOU is 6%, at what price should this bond sell, to the nearest dollar? Assume a par value of $1,000, and pays interest semi-annually.

(A) $852
(B) $1000
(C) $1392
(D) $1388