1) A firm has the following investment alternatives:

Cash Inflows

Year A B C

1 $500 $0 $0

2 500 400 0

3 500 800 0

4 600 900 1,900

Which investment should be considered? (for any credit, show your work). Use a 9.5% discount rate. Hint: A discount rate gives you the clue that you should perform a present value analysis on each investment.

2). An investment is expected to generate $2,000,000 each year for five years. If the firm's cost of funds is 5%, what is the maximum amount the firm should pay for the investment? (for any credit, show your work)

3)21. A firm has 40,000,000 in revenues, 12,500,000 in fixed costs, 10,250,000 in variable costs, and interest of 2,000,000. Compute (for any credit, show your work):

a) DOL

b) DFL

c) DCL