1. Your firm is considering the purchase of a new computer system. The necessary information to make the decision is provided below. What is the NPV and should the firm make the investment in the new computer system?

Cost of computer system: -50,000

Lifetime computer (years): 4

Cost savings from new system: 22,000

Cost of capital: 0.11

A. 7968.33 Yes

B. 38000.00 Yes

C. -262.96 No

2. A $1000 par value bond that was issued two years ago by the Golden Ibis Corporation has a 6% coupon. If the prevailing market rate for interest on comparable bonds is now 7%, then the Golden Ibis bond pays its bondholders an annual interest income of

a. $60, and the bond would sell for less than its par value.

b. $70, and the bond would sell for less than its par value.

c. $70, and the bond would sell for more than its par value.

d. $60, and the bond would sell for more than its par value.