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Date Posted: 10:57:18 03/01/00 Wed
Author: Peter Perers
Subject: My Guesses to Take Home Example Test-please correct Dr. Hodges

Closed Book Section:

1) E-None maximize shareholders wealth not in answers

2) A-decr. in req. rate would incr. price

3) E- NPV postive then PI > 1

4) B-highset NPV

5) skipped for now

6) A-true

7) A-true

8) skipped for now

9)& 10) I can discuss 4 principles of finance,
but I have no idea whether acquisitions being
+, -, or 0 can be determined by these principles
alone. I would think it would depend on each
acquisition specifically.

11) D) - changes in sign or cash flow

12) shipped for now

13) A-true

14) B-false, they need to be after-tax

15) A-true I know straightline increase NI, I wasnt sure about IRR?

Open Book Part:

1) NPV-$50.56
Payback - 2.05 years

2) IRR - 9.67% This one I think is wrong. I wasn't sure how to use the tax rate. The change in NI we are given would already be adjusted for taxes. Right? My initial was
-47mil, cash flows +5.36mil ( add back in depr.?) and my cash flow at year 20 I added in the 2mil from the sale of equipment.

3)NPV- $51710.13

4) C-$4854.20

5) D-$46,712.13

6) C-14.27 years

7) D-10.71%

8) D-$22.72

9) B-$988.73

10) E- $42.00

*** I didn't show my work cause too much typing for me. Hope that's ok???

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