1. P&G sold its prescription drug business to Warner-Chilcott, Ltd. for $3.1 billion. If income from product sales is $2 billion per year and net profit is 20% of sales, what rate of return will the company make over a 10-year planning horizon?

2. Water damage from a major flood in a Midwestern city resulted in damages estimated at $108 million. As a result of the claimant payouts, insurance companies raised homeowners' insurance rates by an average of $59 per year for each of the 160,000 households in the affected city. If a 20-year study period is considered, what was the rate of return on the $ 108 million paid by the insurance companies?

3. U.S. Census Bureau statistics show that the annual earnings for persons with a high school diploma are $35,220 versus $57,925 for someone with a bachelor's degree. If the cost of attending college is assumed 10 be $30,000 per year for 4 years and the forgone earnings during those years are assumed 10 be $35,220 per year, what rate of return does earning a bachelor's degree represent? Use a 35-year study period. (Hint: The investment in years 1 through 4 is the cost of college plus the foregone earnings, and the income in years 5 through 35 is the difference in income between ahigh school diploma and a bachelor's degree.)

4. The Office of Naval Research sponsors a contest for college students to build underwater robots that can perform a series of tasks without human intervention. The University of Florida, with its Subju-Gator robot, won the $7000 first prize (and serious bragging rights) over 2 1 other universities. If the team spent $2000 for parts (al time 0) and the project took 2 years, what annual rate of return did the team make?

5. What is the bond coupon rate on a $25,000 mortgage bond that has semiannual interest payments of $ 1250 and a 20-year maturity date?