Houston Technology’s beta is estimated to be 1.4. The firm’s stock is expected to pay a dividend of $5 at the end of this year and is currently selling for $65. The S&P 500 is currently returning 14%. If the firm expects constant growth in the future of 8%, what is the firm’s after-tax cost of equity? Assume a tax rate of 40%. (6)

Find the IRR for the following project if the firm’s WACC is 8%. (6) Year Cash Flow 0 -9000 1 4,000 2 5,000 3 6,000 4 2,000  

Project A has a NPV of $50,000 and an IRR of 12% while Project B has a NPV of $40,000 and IRR of 16%. Assume the firm has enough funds to pursue both projects, the firm has a WACC of 10%, and that the projects are mutually exclusive. Which project(s) should be pursued? (2)

When WACC = IRR, what is true about NPV? (Warning: SUPER HARD!!! Remember what WACC represents and what IRR represents) (2)

Which of the following projects should be accepted if a firm has a capital budget of $4,000 and a WACC of 5%? (2)  

Firms typically have ______ over their amount of operating leverage since it is largely determined by a firm’s ______. (2)

Which of the following is the ultimate decision rule? (2)

Operating leverage is caused by a firm using ______ since this causes a ______ cost. (2)

WACC is best described as (2)

16.1 El futuro y 17.1 El condicional Completar  Complete the following sentences with the correct irregular forms of the future and conditional tense. Add accent marks as needed. Yo sí [1] (tener) cincuenta pares de zapatos. ¡Me encantan! ¿Usted Sr. [2] (poder) ayudarme mañana en el banco? El próximo domingo por la mañana, nosotros [3] (venir) a la panadería antes de tomar el café. ¿Tú [4] (hacer) la tarea temprano? Ella [5] (salir) de compras con ustedes, pero no tiene tiempo.