1. Netfacts, Inc. has a gross investment in existing projects of $9,000,000. These projects generated gross cash flow of $1,200,000 and have an expected life of 7 years. The salvage value of these projects is estimated to be $900,000. The firm's cost of capital of 12%. Using the simplified approach, what is the CFROI for these projects?

A. 4.41%

B. 8.54%

C. 13.15%

D. 16.54%

E. None of the above

2. Compaq Computers has seen its stock price decline from $45 to $24. The firm expects to reinvest 50% of its $2 billion after-tax operating income in new investments and to earn a return on capital of 10.69%. The firm is currently all equity financed and has a cost of equity of 11.50%. Assuming that Compaq's expected growth rate is perpetual, what is the value of the firm?

A. $17.13 billion

B. $18.39 billion

C. $19. 98 billion

D. $20.21 billion

E. None of the above