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# FIN 534 Week 8 Homework

 Directions: Answer the following questions on this document.  Explain how you reached the answer or show your work if a mathematical calculation is needed, or both.  Submit your assignment using the assignment link in the course shell.  This homework assignment is worth 100 points. Use the following information for questions 1 through 5: Assume you are presented with the following mutually exclusive investments whose expected net cash flows are as follows:

What is each project’s IRR?

If each project’s cost of capital were 10%, which project, if either, should be selected?

4.  What is each project’s MIRR at the cost of capital of 10%?  At 17%?  (Hint: Consider Period 7

What is the crossover rate and what is its significance?

What is significance of the Crossover Rate?

6.  Assume that the project has average risk.  Find the project’s expected NPV.  (Hint: Use expected values for the net cash flow in each year.)

7.  Find the best-case and worst-case NPVs?  What is the probability of occurrence of the worst case if the cash flows are perfectly dependent (perfectly positively correlated) over time?

 8.  Assume that all the cash flows are perfectly positively correlated.  That is, assume there are only three possible cash flow streams over time – the worst case, the most likely (or base) case, and the best case – with respective probabilities of 0.20, 0.60, and 0.20.  these cases are represented by each of the columns in the table.  Find the Expected NPV, its standard deviation, and its coefficient of variation for each probability.

 9. What were Wallace’s total long-term debt and total liabilities in 2013?  (Problem 12-5)