What is the standard deviation of the returns on a $30,000 portfolio that consists of Stocks S and T? Stock S is valued at $18,000. State of Economy Probability of State of Economy Rate of Return if State Occurs Stock S Stock T Boom .05 .11 .09 Normal .85 .08 .07 Bust .10 −.05 .04

Wholesome Breads uses specialized ovens to bake its bread. One oven costs $490,000 and lasts 15 years before it needs to be replaced. The annual operating cost per oven is $18,000. If the required rate of return is 17 percent, what is the equivalent annual cost of an oven?

GPR, Incorporated, has an inventory turnover of 18.96 times, a payables turnover of 11.19 times, and a receivables turnover of 8.26 times. What is the length of the company’s cash cycle? Assume 365 days per year.

If a firm experiences _____, it makes sense to offer a longer credit period to customers.

The Green Fiddle is considering a project with sales of $86,800 a year for the next four years. The profit margin is 6 percent, the project cost is $97,500, and depreciation is straight-line to a zero book value over the life of the project. The required accounting return is 10.8 percent. This project should be _____ because the AAR is _____ percent.

A project has average net income of $4,720 per year over its 4-year life. The initial cost of the project is $63,000 which will be depreciated using straight-line depreciation to a book value of zero over the life of the project. The firm set a minimum average accounting return of 11.65 percent. The firm should _____ the project because the AAR is _____ percent.

The Well Derrick has 6.3 percent preferred stock outstanding that sells for $57 per share. This stock was originally issued at $45 per share and has a stated value of $100 per share. What is the cost of preferred stock if the relevant combined tax rate is 23 percent?

Myers Storage purchased a parcel of land four years ago at a cost of $112,600. Today, the land has a market value of $136,600. At the time of the purchase, the company spent $8,400 to grade the land and another $11,500 to install electrical access. The company now wants to build a new facility on the site at an estimated cost of $522,700. What amount should be used as the initial cash flow for this project?

Leung Crafts is contemplating the purchase of a new $218,000 computer-based order entry system. The system will be depreciated straight-line to zero over the system’s five-year life. No bonus depreciation will be taken. The system will be worth $20,000 at the end of five years. The company will save $73,500 before taxes per year in order processing costs and will reduce working capital by $18,600 on Day 1. The net working capital will return to its original level when the project ends. The tax rate is 21 percent. What is the internal rate of return for this project?

AZ Products has 140,000 shares of common stock outstanding at a market price of $27 per share. Next year’s annual dividend is expected to be $1.43 per share and the dividend growth rate is 2 percent. The company also has 2,500 bonds outstanding with a face value of $1,000 per bond. The bonds have a pretax yield of 7.35 percent and sell at 98.2 percent of face value. The company’s tax rate is 21 percent. What is the weighted average cost of capital?