You are a senior manager at Boeing and have been authorized to invest $400,000 in a project. You are considering three projects with the following basic information:

Sparkling Drinking Water Company expects to maintain sales of 2.1 million bottles of drinking water per year forever, with a selling price of $1.25 per bottle and a cost of $0.75 per bottle. Sales profits and costs occur at the end of the year. Revenues will increase at a real annual rate of 6%, while actual costs will increase at a real annual rate of 5%. The actual discount rate is 10%, and the company tax rate is 34%. What is the value of Sparkling Company today?

LJ Toy Company has just purchased a machine for $250,000 to produce toy cars. The machine will be depreciated over its 5-year useful life using straight-line depreciation. Each toy car sells for $25, with variable costs of $6 per toy and fixed costs of $360,000 per year. The company tax rate is 34%. The appropriate discount rate is 12%. What is the project’s financial breakeven point?

If the current interest rate paid by treasury bills is 5% and the inflation rate is 3.9%, what is the approximate real interest rate? What is the accurate real interest rate?

Hacker Software Company has bonds outstanding with a face value of 7.4% and a maturity of 9 years. These bonds pay interest semi-annually, and are currently selling at 96% of the face value. What is the current yield, yield to maturity, and effective annual yield of the bonds?