5. A degree program cost $50,000 in total expenses: $30,000 in tuition and $20,000 in housing and books. The US government provides a grant for $10,000 of the tuition. Moreover, the university pays $20,000 of the $30,000 tuition in salary to your instructors. Being in the program is so much fun; you would be willing to a net of $5,000 for the pleasure, relative to your alternatives. What is the net cost of the education to you?
6. A project costs $19,000 and promises the following cash flow:
Year 1 2 3
Cash Flow $12,500 $6,000 $3,000
The appropriate discount rate is 15% per annum. Should you invest in this project?
7. Which of the following are good candidates for ascertaining the value effects with an event study, and why?
An acquirer wants to buy the firm
The CEO dies
The CEO ages
Positive earnings surprise at the annual meeting
Purchase of a new machine
A law is passed to force the company to reduce its emissions
An Ad campaign