Advanced Corporate Finance
Exam Materials
Course Introduction
Advanced Corporate Finance examines sophisticated concepts and tools used in financial decision-making within corporations. The course covers topics such as capital structure, dividend policy, mergers and acquisitions, corporate governance, risk management, and valuation techniques. Emphasis is placed on case studies and real-world applications, requiring students to analyze complex financial scenarios and propose strategies that maximize shareholder value. The course also explores current trends and issues in corporate finance, preparing students to tackle financial challenges faced by modern firms in dynamic global markets.
Recommended Textbook
Corporate Finance 3rd Canadian Edition by Jonathan Berk
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Page 2
Chapter 1: The Corporation
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Q1) One of the major characteristics of a limited liability partnership,LLP,in Canada is
A) the limitation on a partner's liability is only in cases related to actions of negligence by other partners or those supervised by other partners.
B) any partner will not be liable for his or her negligence at any time.
C) any partners will be only liable for other partners' negligence.
D) none of the above
Answer: A
Q2) The Principal-Agent Problem arises
A) because managers have little incentive to work in the interest of shareholders when this means working against their own self-interest.
B) because of the separation of ownership and control in a corporation.
C) Both A and B.
D) None of the above.
Answer: C
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3
Chapter 2: Introduction to Financial Statement Analysis
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Q1) When using the book value of equity,the debt to equity ratio for Luther in 2006 is closest to:
A) 2.21
B) 2.29
C) 2.98
D) 3.03
Answer: B
Q2) Which of the following is NOT a financial statement that every public company is required by IFRS to produce?
A) Income Statement
B) Statement of Comprehensive Income
C) Balance Sheet
D) Statement of Changes in Equity
Answer: B
Q3) Depreciation is ________ that the firm ________.
A) an actual cash expense; pays
B) not an actual cash expense; receives
C) not an actual cash expense; pays
D) an actual cash expense; receives
Answer: C
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Chapter 3: Arbitrage and Financial Decision Making
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Q1) You have an investment opportunity in Germany that requires an investment of $250,000 today and will produce a cash flow of 208,650 in one year with no risk.Suppose the risk-free rate of interest in Germany is 6% and the current competitive exchange rate is 0.78 to $1.00.What is the NPV of this project? Would you take the project?
A) NPV = 0; No
B) NPV = 2,358; No
C) NPV = 2,358; Yes
D) NPV = 13,650; Yes
Answer: C
Q2) If the risk-free interest rate is 10%,then the NPV for "moe" is closest to:
A) -3.64
B) 2.73
C) 3.18
D) 3.64
Answer: A
Q3) The price per share of the ETF in a normal market is:
Answer: Value of ETF = 2 × 79.50 + 3 × 40.00 + 3 × 48.50 = $424.50
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Page 5
Chapter 4: The Time Value of Money
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Q1) After your grandmother retired,she purchased an annuity contract for $250,000 that will pay her $25,000 at the end of every year until she dies.The appropriate interest rate for this annuity is 8%.The number of years that your grandmother must live in order to get more value out of the annuity than what she paid for it is closest to:
A) 21
B) 16
C) 8
D) 10
Q2) The British government has just issued a new consol bond that sells for £1000 and pays interest of 8%.The annual interest payment on this bond must be:
A) £80
B) £8
C) £1,000
D) £12,500
Q3) Suppose a second entrepreneur approaches Joe and offers him $250,000 today for the business.Should Joe accept the new entrepreneur's offer or stick with the original offer of $100,000 and the series of payments over three years? Why?
Q4) Draw a timeline detailing the cash flows from investment "A."
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Page 6
Chapter 5: Interest Rates
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Q1) The amount of your original loan is closest to:
A) $37,000
B) $32,000
C) $20,300
D) $31,250
Q2) Which alternative offers you the lowest effective rate of return?
A) Investment A
B) Investment B
C) Investment C
D) Investment D
Q3) The lowest effective rate of return you could earn on any of these investments is closest to:
A) 6.250%
B) 6.267%
C) 6.100%
D) 6.300%
Q4) After examining the yield curve,what predictions do you have about interest rates in the future? About future economic growth and the overall state of the economy?
Q5) What is the effective after-tax rate of each instrument,expressed as an EAR?
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Chapter 6: Valuing Bonds
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Q1) Consider a zero-coupon bond with a $1,000 face value and 20 years to maturity.The price this bond will trade for if the YTM is 6% is closest to:
A) $215
B) $312
C) $335
D) $306
Q2) Consider a zero-coupon bond with a face value of $1,000 and 20 years to maturity.The amount that the price of the bond will change if its yield to maturity decreases from 7% to 5% is closest to:
A) $120
B) -$53
C) $53
D) $673
Q3) The price today of a 4-year default-free security with a face value of $1,000 and an annual coupon rate of 5.25% is closest to:
A) $1,000
B) $1,003
C) $1,008
D) $987
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Chapter 7: Valuing Stocks
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Q1) The firm's weighted average capital cost (WACC)is mainly used in
A) the zero dividend growth model.
B) the constant dividend growth model.
C) the discounted free cash flow model.
D) the total payout model.
Q2) Which of the following statements is false?
A) Because the enterprise value represents the entire value of the firm before the firm pays its debt, to form an appropriate multiple, we divide it by a measure of earnings or cash flows after interest payments are made.
B) We can compute a firm's P/E ratio by using either trailing earnings or forward earnings with the resulting ratio called the trailing P/E or forward P/E.
C) It is common practice to use valuation multiples based on the firm's enterprise value.
D) Using a valuation multiple based on comparables is best viewed as a "shortcut" to the discounted cash flow method of valuation.
Q3) What do you anticipate will happen to Lockheed-Martin and Boeing's stock prices are a result of this surprise announcement?
Q4) Calculate the enterprise value for DM Corporation.
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Chapter 8: Investment Decision Rules
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Q1) The NPV for Boulderado's snowboard project is closest to:
A) $228,900
B) $46,900
C) $51,600
D) $23,800
Q2) The NPV for project Alpha is closest to:
A) $20.96
B) $16.92
C) $24.01
D) $14.41
Q3) Unconventional cash flows normally means
A) that you have cash outflows at the beginning of the investment and have cash inflows afterwards.
B) that you have cash inflows at the beginning of the investment and have cash outflows afterwards.
C) that you have major cash outflows at the beginning of the investment and have both cash outflows and cash inflows afterwards.
D) none of the above.
Q4) If the discount rate for project B is 15%,then what is the NPV for project B?
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Chapter 9: Fundamentals of Capital Budgeting
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Q1) You are considering investing $600,000 in a new automated inventory system that will provide after-tax cost savings of $50,000 next year.These cost savings are expected to grow at the same rate as sales.If sales are expected to grow at 5% per year and your cost of capital is 10%,then what is the NPV of the automated inventory system?
A) $400,000
B) $500,000
C) -$100,000
D) $1,000,000
Q2) When Canadian firms need to determine the asset class and the relevant CCA rate,they can find the necessary information from
A) the Canadian Generally Accepted Accounting Principles (GAAP).
B) the Canadian Revenue Agency (CRA).
C) the respective provincial government's office.
D) the International Financial Report Standard (IFRS).
Q3) Under Canadian GAAP,
A) Capital Cost Allowance is not mentioned at all in capital budgeting.
B) Capital Cost Allowance is usually used in capital budgeting.
C) Capital Cost Allowance is usually not used in capital budgeting.
D) none of the above.
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Page 11
Chapter 10: Capital Markets and the Pricing of Risk
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Sample Questions
Q1) The average annual return on the S&P 500 from 1996 to 2005 is closest to:
A) 7.10%
B) 4.00%
C) 9.75%
D) 8.82%
Q2) Which of the following statements is false?
A) The standard deviation is the square root of the variance.
B) Because investors dislike only negative resolutions of uncertainty, alternative measures that focus solely on downside risk have been developed, such as the semi-variance and the expected tail loss.
C) While the variance and the standard deviation are the most common measures of risk, they do not differentiate between upside and downside risk.
D) While the variance and the standard deviation both measure the variability of the returns, the variance is easier to interpret because it is in the same units as the returns themselves.
Q3) What is the market portfolio?
Q4) What is the difference between common risk and independent risk?
Q5) Which pharmaceutical company faces less risk?
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Chapter 11: Optimal Portfolio Choice and the Capital Asset Pricing Model
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Q1) The expected return of a portfolio that consists of a long position of $10,000 in Wal-Mart and a short position of $2,000 in Microsoft is closest to:
A) 21%
B) 12%
C) 27%
D) 18%
Q2) To identify the efficient portfolio we must know ________,________,and ________ between investments.
A) risk level; required return; profitability
B) value of risk free; required return; correlations
C) expected return; volatilities; correlations
D) systematic risk; nonsystematic risk and required return
Q3) The Sharpe ratio for your portfolio is closest to:
A) 1.2
B) 0.6
C) 1.0
D) 0.7
Q4) What is the efficient frontier and how does it change when more stocks are used to construct portfolios?
Page 13
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Chapter 12: Estimating the Cost of Capital
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Q1) The e<sub>i</sub> in the regression
A) measures the market risk in returns.
B) measures the deviation from the best fitting line and is zero on average.
C) measures the sensitivity of the security to market risk.
D) measures the historical performance of the security relative to the expected return predicted by the SML.
Q2) If KT expects to maintain a debt-to-equity ratio for this project of .6,then KT's project-based WACC,r<sub>wac</sub><sub>c</sub>,for this project is closest to:
A) 10.5%
B) 11.1%
C) 9.6%
D) 10.8%
Q3) Assuming that Tom wants to maintain the current expected return on his portfolio,then the minimum volatility that Tom could achieve by investing in the market portfolio and risk-free investment is closest to:
A) 20%
B) 25%
C) 22%
D) 18%
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Page 14
Chapter 13: Investor Behaviour and Capital Market
Efficiency
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Q1) The size effect reflects the fact that returns of small stocks appear ________ even accounting for their ________ beta.
A) high; lower
B) low; higher
C) low; lower
D) high; higher
Q2) The term a<sub>s </sub>is a(n)
A) error term that has an expectation of zero and is uncorrelated with either factor.
B) measure of the expected percent change in the excess return of a security for a 1% change in the excess return of the first factor portfolio.
C) measure of the expected percent change in the excess return of a security for a 1% change in the excess return of the second factor portfolio.
D) constant term.
Q3) What does the existence of a positive alpha investment strategy imply?
Q4) Why is the high trading volume observed in markets inconsistent with the CAPM equilibrium?
Q5) Explain why the market portfolio proxy may not be efficient.
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Chapter 14: Financial Options
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Q1) Consider the following equation: C = S - K + dis(K)+ P - PV(Div) In this equation,dis(K)+ P - PV(Div)tells us
A) the market value of the option.
B) the difference in the price of an American option over a European option because of dividend capture.
C) the intrinsic value of the option.
D) the time value of the option.
Q2) You have decided to buy 10 January 2009 call options on Merck with an exercise price of $45 per share.How much will this transaction cost you and are these contracts in- or out-of-the-money?
Q3) American options allow their holders to exercise the option ________.European options allow their holders to exercise the option ________.
A) only on the expiration date; on any date up to and including a final date
B) on any date up to but not including expiration date; on any date up to and including a final date
C) on any date up to and including a final date; only on the expiration date
D) on any date before the expiration date; on any date including the expiration date
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Page 16
Chapter 15: Option Valuation
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Q1) Which of the following statements is correct?
A) Prior to the Black-Scholes formula, most economists and practitioners anticipated that mathematical formulas could be derived that could accurately price financial securities such as options.
B) Without the Black-Scholes formula, the job of corporate managers would be very different: many corporations would bear much less risk than they now do.
C) The most important factors contributing to the huge growth in the types of financial securities that are available today are the techniques that everyone uses to discount them.
D) It is not an exaggeration to say that the techniques developed by Black, Scholes, and Merton to value options changed the course of financial economics and gave birth to a new profession: financial engineering.
Q2) Risk-neutral probabilities are known by other names as well: ________.
A) martingale prices
B) state prices
C) state-contingent prices
D) all the above
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17
Chapter 16: Real Options
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Q1) If there is ________ to waiting,investing ________ never makes sense.
A) cost; late
B) cost; early
C) no cost; early
D) no cost; late
Q2) The equivalent annual benefit of project A is closest to:
A) $21.70
B) $5.05
C) $24.00
D) $3.40
Q3) Assuming that Kinston has the ability to sell the prototype in year one for $300,000,the NPV of the Kinston Industries Mountain Bike Project is closest to:
A) $90,000
B) $590,000
C) $455,000
D) -$45,000
Q4) Assuming you are able to sell the plant,draw a decision tree detailing this problem.
Q5) Describe the two factors that affect the value of an investment timing option?
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Chapter 17: Capital Structure in a Perfect Market
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Q1) Sisyphean Bolder Movers Incorporated has no debt,a total equity capitalization of $50 billion,and a beta of 2.0.Included in Sisyphean's assets are $12 billion in cash and risk-free securities.Calculate Sisyphean's enterprise value and unlevered cost of equity considering the fact that Sisyphean's cash is risk-free.
Q2) What is Luther's enterprise value?
A) $16 billion
B) $10.5 billion
C) $24 billion
D) $20 billion
Q3) Suppose you own 10% of the equity of Without.What is another portfolio you could hold that would provide you with the same exact cash flows?
Q4) Suppose you own 10% of the equity of With.What is another portfolio you could hold that would provide you with the same exact cash flows?
Q5) Equity in a firm with debt is called
A) levered equity.
B) riskless equity.
C) unlevered equity.
D) risky equity.
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Chapter 18: Debt and Taxes
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Q1) KAHR Incorporated will have EBIT this coming year of $45 million.It will also spend $18 million on total capital expenditures and increases in net working capital,and have $9 million in depreciation expenses.KAHR is currently an all-equity firm with a corporate tax rate of 35% and a cost of capital of 10% If the interest rate on new KAHR debt is 8%,how much should KAHR borrow today if they want to maximize their interest tax shield?
Q2) The interest rate tax shield for Kroger in 2004 is closest to:
A) $268 million
B) $393 million
C) $211 million
D) $94 million
Q3) Assuming that the risk is the same as the loan,the present value of LCMS' interest tax shield is closest to:
A) $45.5 million
B) $20.0 million
C) $24.5 million
D) $35.0 million
Q4) If Flagstaff currently maintains a .8 debt to equity ratio,then calculate the value of Flagstaff's interest tax shield.
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Page 20
Chapter 19: Financial Distress, managerial Incentives, and Information
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Q1) Assume that in the event of default,20% of the value of MI's assets will be lost in bankruptcy costs.Suppose that at the start of the year,MI has no debt outstanding,but has 5.6 million shares of stock outstanding.If MI does not issue debt,its share price is closest to:
A) $5.15
B) $23.75
C) $23.90
D) $25.00
Q2) In many Canadian cases the actual ownership and exposure to the resources of the firm is ________ while the voting control is ________.This is accomplished by dominant shareholders (usually controlling families)that utilize super-voting shares,cross ownership,or pyramidal ownership structures.
A) large; small
B) small; large
C) large; large
D) small; small
Q3) Suppose that MI has zero-coupon debt with a $140 million face value due next year.Calculate the value of levered equity,the value of debt,and the total value of MI with leverage.
Page 21
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Chapter 20: Payout Policy
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Q1) Omicron's enterprise value is closest to:
A) $500 million
B) $900 million
C) $450 million
D) $400 million
Q2) Which of the following statements is false?
A) Unlike with capital structure, taxes are not an important market imperfection that influence a firm's decision to pay dividends or repurchase shares.
B) If dividends are taxed at a higher rate than capital gains, which has been true until the most recent change to the tax code, shareholders will prefer share repurchases to dividends.
C) Shareholders typically must pay taxes on the dividends they receive. They must also pay capital gains taxes when they sell their shares.
D) But because long-term investors can defer the capital gains tax until they sell, there is still a tax advantage for share repurchases over dividends.
Q3) Calculate the effective tax disadvantage for retaining cash in 1999,2001,and 2005.
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Chapter 21: Capital Budgeting and Valuation With Leverage
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Q1) Aardvark's unlevered cost of equity is closest to:
A) 10.0%
B) 10.4%
C) 9.5%
D) 9.0%
Q2) Which of the following statements is false?
A) To determine the project's debt capacity for the interest tax shield calculation, we need to know the value of the project.
B) To compute the present value of the interest tax shield, we need to determine the appropriate cost of capital.
C) Because we don't value the tax shield separately, with the APV method we need to include the benefit of the tax shield in the discount rate as we do in the WACC method.
D) A target leverage ratio means that the firm adjusts its debt proportionally to the project's value or its cash flows.
Q3) Describe three simplifying assumptions that we make in valuing a project.
Q4) Calculate the debt capacity of Omicron's new project for years 0,1,and 2.
Q5) Describe the key steps in the WACC valuation method.
Q6) Calculate the NPV for Iota's new project.
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Chapter 22: Valuation and Financial Modelling: a Case Study
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Q1) If the risk-free rate of interest is 6% and the market risk premium has historically averaged 5%,then the cost of capital for Luxottica is closest to:
A) 10.2%
B) 13.5%
C) 9.1%
D) 14.7%
Q2) Based upon the average EV/EBITDA ratio of the comparable firms,if Ideko holds $6.5 million of cash in excess of its working capital needs,then Ideko's target market value of equity is closest to:
A) $155 million
B) $157 million
C) $165 million
D) $191 million
E) $193 million
Q3) The unlevered beta for Nike is closest to:
A) 0.70
B) 1.00
C) 1.50
D) 0.60
24
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Chapter 23: The Mechanics of Raising Equity Capital
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Q1) Which of the following statements is NOT true regarding angel investors?
A) They are typically arranged as limited partnerships.
B) For many start-ups, the first round of outside private equity financing is often obtained from them.
C) Because their capital investment is often large relative to the amount of capital already in place at the firm, they typically receive a sizeable equity share in the business in return for their funds.
D) These investors are frequently friends or acquaintances of the entrepreneur.
Q2) When referring to IPOs,what is book building?
Q3) Sovereign wealth funds (SWFs)are pools of money controlled ________.
A) by publicly traded corporations
B) by private firms
C) by a government
D) by non-profit organizations
Q4) What will the offer price of these shares be if Luther is selling 1 million shares?
A) $17.00
B) $17.50
C) $17.25
D) $16.75
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Chapter 24: Debt Financing
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Q1) Which of the following statements is false?
A) If the issuer fails to live up to any covenant, the issuer goes into bankruptcy.
B) The stronger the covenants in the bond contract, the less likely the issuer will be to default on the bond, and so the lower the interest rate investors will require to buy the bond.
C) Covenants are restrictive clauses in a bond contract that limit the issuer from taking actions that may undercut its ability to repay the bonds.
D) Bond agreements often contain covenants that restrict the ability of management to pay dividends.
Q2) What kind of corporate debt can be secured by any specified assets?
A) Mortgage bonds
B) Notes
C) Asset-backed bonds
D) Debentures
Q3) What is the Yield to Call (YTC)on this bond?
Q4) What is the Yield to Maturity (YTM)on this bond?
Q5) What is the Yield to Call (YTC)on this bond?
Q6) What is the Yield to Maturity (YTM)on this bond?
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Chapter 25: Leasing
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Q1) Which of the following statements is false?
A) Because we are getting the entire asset when we purchase it with the loan, the loan payments are higher than the lease payments.
B) In a perfect market, the cost of leasing and then purchasing the asset is equivalent to the cost of borrowing to purchase the asset.
C) With a lease we are financing the entire cost of the asset; with a standard loan we are financing only the cost of the economic depreciation of the asset during its life.
D) The amount of the lease payment will depend on the purchase price, the residual value, and the appropriate discount rate for the cash flows.
Q2) What will Luther's balance sheet look like if they acquire the new fleet of delivery trucks using a capital lease?
Q3) Special-purpose entity (SPE)is diminishing in Canada as accounting moves to
A) International Financial Reporting Standards
B) Generally Accepted Accounting Principles
C) standards of the Canadian Institute of Chartered Accountants
D) capital cost allowance
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Page 27
Chapter 26: Working Capital Management
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Q1) Which of the following money market investments is a short-term debt obligation of the Canadian government?
A) Treasury Bill
B) Repurchase Agreement
C) Commercial Paper
D) Certificates of Deposit (CD)
E) Banker's Acceptance
Q2) Stretching the accounts payable means to ________.
A) reduce the trade credit period
B) raise the amount of accounts payable
C) decrease the discount percentage offered
D) increase the trade credit period
Q3) Which one of the following is NOT one of the three steps involved in establishing a credit policy?
A) Establishing credit payment patterns
B) Establishing credit standards
C) Establishing a collection policy
D) Establishing credit terms
Q4) Describe "just-in-time" inventory management.
Q5) What is a compensating balance?
28
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Chapter 27: Short-Term Financial Planning
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Q1) Which of the following statements is false?
A) The matching principle indicates that the firm should finance permanent working capital with short-term sources of funds.
B) Following the matching principle should, in the long run, help minimize a firm's transaction costs.
C) In a perfect capital market, the choice of financing is irrelevant; thus how the firm chooses to finance its short-term cash needs cannot affect value.
D) A portion of a firm's investment in its accounts receivable and inventory is temporary and results from seasonal fluctuations in the firm's business or unanticipated shocks.
Q2) In Canada,the overnight rate bank rate is stipulated by ________.
A) the Ministry of Finance
B) the domestic capital market
C) the Bank of Canada
D) the domestic money market
Q3) Kinston Industries issued $4,000,000 in commercial paper which matures in six months and received $3,876,000.Calculate the effective annual rate that Kinston is paying.
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Chapter 28: Mergers and Acquisitions
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Q1) Which of the following statements regarding mergers and taxes is false?
A) Because it may be easier to measure performance accurately in a conglomerate, agency costs may be reduced and resources may be more efficiently allocated.
B) Because employees holding a large fraction of their wealth in shares of the corporation for which they work are obligated to hold idiosyncratic risk, they benefit when the firm reduces that risk by conglomerating.
C) Like a large portfolio, large firms bear less idiosyncratic risk, so often mergers are justified on the basis that the combined firm is less risky.
D) Because most stockholders will already be holding a well-diversified portfolio, they get no further benefit from the firm diversifying through acquisition.
Q2) This period is known for hostile,"bust-up" takeovers,in which the acquirer purchased a poorly performing conglomerate and sold off its individual business units for more than the purchase price:
A) 1960s
B) 1970s
C) 1980s
D) 1990s
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Chapter 29: Corporate Governance
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Q1) In Canada,insider trading laws exist at ________.
A) both the provincial and federal levels
B) both the provincial and municipal levels
C) the provincial level
D) the federal level
Q2) In Canada and Europe,many corporations are run by families that own controlling blocks of shares.The central conflict is between what are called ________ and ________.
A) controlling shareholders; minority shareholders
B) controlling stakeholders; minority stakeholders
C) controlling investors; minority investors
D) controlling creditors; minority creditors
Q3) What is corporate governance?
Q4) In Canada,________,Section 122.1.a,defines the board's duty to act in the best interests of ________.
A) the Canada Business Corporations Act (CBCA); the corporation
B) the Canada Business Corporations Act (CBCA); the stakeholders
C) the Companies Creditors Arrangement Act (CCAA); the corporation
D) the Companies Creditors Arrangement Act (CCAA); the stakeholders
Q5) How does a pyramid structure work?
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Chapter 30: Risk Management
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Q1) A currency forward contract specifies all of the following EXCEPT
A) the amount of currency to exchange.
B) the spot exchange rate.
C) the delivery date on which the exchange will take place.
D) the currencies to be exchanged.
Q2) Which of the following statements is false?
A) Horizontal integration entails the merger of a firm and its supplier or a firm and its customer.
B) Like insurance, hedging involves contracts or transactions that provide the firm with cash flows that offset its losses from price changes.
C) For many firms, changes in the market prices of the raw materials they use and the goods they produce may be the most important source of risk to their profitability.
D) Because an increase in the price of the commodity raises the firm's costs and the supplier's revenues, these firms can offset their risks by merging.
Q3) Assuming that your firm will purchase insurance,what is the minimum-size deductible that would leave your firm with an incentive to implement the new safety policies?
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Chapter 31: International Corporate Finance
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Q1) Luther Industries,a Canadian firm,has a subsidiary in the United Kingdom.This year,the subsidiary reported and repatriated earnings before interest and taxes (EBIT)of £45 million.The current exchange rate is $1.86/£.The tax rate in the U.K.for this activity is 28%.Under Canadian tax codes,Luther is facing a 35% corporate tax rate on their earnings.What is Luther's Canadian tax liability on its U.K.subsidiary?
Q2) Canadian tax policy requires that a ________ is given for foreign taxes paid up to the amount of the ________.
A) 50 percent tax credit; Canadian tax liability
B) full tax credit; Canadian tax liability
C) 50 percent tax credit; foreign tax liability
D) full tax credit; foreign tax liability
Q3) Using the covered interest parity condition,the calculated one-year forward rate
F<sub>1 </sub>is closest to:
A) $1.8568/£
B) $1.8764/£
C) $1.9161/£
D) $1.8961/£
Q4) What is the dollar present value of the project?
Q5) Calculate the pound denominated cost of capital for Luther's project.
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