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1. If you (1) decrease your required return and (2) decrease the number of periods, what effect would this have on your present value ?
a) decrease, decrease
b) decrease, increase
c) increase, decrease
d) increase, increase
2. Calculate the internal rate of return of an investment with the following cash flows assuming the cost of capital is 15%.
a. 13.44%
b. 15.44%
c. 17.44%
d. 19.44%.
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John Jones currently holds tax-exempt bonds that pay 7% interest and is in the 32% tax bracket. He is considering buying taxable bonds. With all else the same, what interest rate on the taxable bonds will he need to get the same after-tax return as t..
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