account . From this account , Child B will receive $ 2,000 per month for the next four years . Whatever is left at that time will go to Child A to help start the business . You want Child A to receive $ 96,000 at that time . The account pays 7 % annually , compounded monthly . How much money do you need to start the account ? Show your work .
7 . ( TCO F ) A project requires an initial cash outlay of $ 95,000 and has expected cash inflows of $ 20,000 annually for 9 years . The cost of capital is 10 %. What is the project ’ s NPV ? Show your work .
8 . ( TCO F ) A project requires an initial cash outlay of $ 60,000 and has expected cash inflows of $ 15,000 annually for 8 years . The cost of capital is 10 %. What is the project ’ s payback period ? Show your work .
9 . ( TCO F ) A project requires an initial cash outlay of $ 95,000 and has expected cash inflows of $ 20,000 annually for 9 years . The cost of capital is 10 %. What is the project ’ s IRR ? Show your work .
10 . ( TCO F ) A project requires an initial cash outlay of $ 40,000 and has expected cash inflows of $ 12,000 annually for 7 years . The cost of capital is 10 %. What is the project ’ s discounted payback period ? Show your work .
11 . ( TCO F ) Company A has the opportunity to do any , none , or all of the projects for which the net cash flows per year are shown below . The projects are not mutually exclusive . The company has a cost of capital of 15 %. Which should the company do and why ? You must use at least two capital budgeting methods . Show your work . Explain your answer thoroughly .
( 1 ) ( TCO A ) Which of the following statements is CORRECT ? ( Points : 10 )
( a ) It is generally more expensive to form a proprietorship than a corporation because , with a proprietorship , extensive legal documents are required . ( b ) Corporations face fewer regulations than sole proprietorships . ( c ) One disadvantage of operating a business as a sole proprietorship is that the firm is subject to double taxation , at both the firm level and the owner level . ( d ) One advantage of forming a corporation is that equity investors are usually exposed to less liability than in a regular partnership . ( e ) If a regular partnership goes bankrupt , each partner is exposed to liabilities only up to the amount of his or her investment in the business .
( 2 ) ( TCO G ) A security analyst obtained the following information from Prestopino Products ’ financial statements :