1. The initial outlay or cost is $1,000,000 for a four - year project. The respective future cash inflows for years 1, 2, 3 and 4 are: $500,000, $300,000, $300,000 and $300,000. What is the paybac k period wit hout discounting cash flows?

A) About 2.50 years B) About 2.67 years C) About 4.50 years D) About 3.67 years E) None of the above

2. Bonds with ratings lower than Standard & Poor's BBB or Moody's Baa are classified as

A. in default.

B. investment grade.

C. not investment grade.

D. medium quality.

3. Company x has a capital structure which is based on 60 percent debt, 20 percent preferred stock and 20 percents common stock. The pre-tax cost of debt is 5 percent, the cost of preferred is 9 percent, and the cost of commont stock is 12 percent. The company's tax rat is 30 percent. The company is considering a project that is equally as risky as the overall firm. This project has initial costs of 3,000 and annual cash inflows of $700, $1900, and $6000 over the next three years respectively. What is the projected net present value of this project?

A 3520

B 3924

C 4335

D 4007

E 3957