1. A firm is most likely to call an outstanding bond issue when:

a. interest rates rise

b. it needs to raise new funds

c. interest rates fall

d. its cost of capital increases

2. A firm is evaluating a project that will increase annual cash sales by $145,000 and increase annual cash costs by $94,000. The project will initially require $110,000 in fixed assets that will be depreciated straight-line to a zero book value over the four-year life of the project. The applicable tax rate is 32 percent and the required rate of return is 10%. Compute the Net Present Value of the Project.

a. $27,826

b. $43,480

c. $63,920

d. $29,920