1. Given the following capital project data:
- Cost of automation system (invoice): $730,000
- Transportation and installation: $140,000
- Training: $100,000
- Firm's WACC: 9%
- Firm's tax rate: 35%
- Depreciation 5 years, straight line
- Life of project: 3 years
- Salvage value: $385,000
- Annual cost savings (net): $105,000
- Increased annual sales (net): $200,000
Calculate (1) the payback, (2) the discounted payback, (3) the NPV, (4) the IRR, (5) the MIRR, and (6) your recommendation on the project.
2. Suppose you believe that Johnson Company's stock price is going to increase from its current level of $22.50 sometime during the next 6 months. For $250.30 you can buy a 6-month call option giving you the right to buy 100 shares at a price of $25 per share. If you buy this option for $250.30 and Johnson's stock price actually rises to $48, what would your net profit be?
3. The December CBOT Treasury bond futures contract is quoted at 92-19. If annual interest rates go up by 1.50 percentage points, what is the gain or loss on the futures contract? (Assume a $1,000 par value, and round to the nearest whole dollar.)