1. Calculate the after-tax return on the following securities for a company that is in the 30% federal tax bracket. Assume the tax rate on dividends is 15%.
Treasury bonds at 5%
Corporate bonds at 8.25%
Municipal bonds at 7%
Preferred stock at 6.5%
2. A project has an initial cost of $40,000, expected net cash inflows of $9,000 per year for 7 years, and a cost of capital of 11%. What is the project’s NPV? (Hint: Begin by constructing a time line.)
(10-2) Refer to Problem 10-1. What is the project’s IRR?
(10-3) Refer to Problem 10-1. What is the project’s MIRR?
(10-4) Refer to Problem 10-1. What is the project’s PI?
(10-5) Refer to Problem 10-1. What is the project’s payback period?
(10-6) Refer to Problem 10-1. What is the project’s discounted payback period?