1. Holly Inc has a project with a cost of -$X with an equal the cash inflow of $700 for three years. If the project’s payback is 2.2 years, the cost of capital is 9%, and the IRR is 17.27%, what is the NPV of this project?
Year 0 1 2 3
Cash Flows -$X $700 $700 $700
a. $-1,540.00 b. $231.91 c. $0 d. $560.00 e. $200.80
2. When using the WACC as the discount rate the firm takes in to account the risk of the capital providers that invest in the firm. True/False
3. In response to a one percentage point decrease in yield to maturity, what happens?
A. the price of short-term securities fall by a greater percentage than the price of long-term securities.
B. the price of short-term securities rise by a greater percentage than the price of long-term securities.
C. the price of short-term securities fall by a lower percentage than the price of long-term securities.
D. the price of short-term securities rise by a lower percentage than the price of long-term securities.