Question 1:  (Capital Budgeting)  2 pointsCalculate theIRR of the following project:  Year  Cash Flow    0    ($55,000)    1    $21,000    2    $23,000    3    $25,000Question 2:  (Capital Budgeting)  2 pointsCalculate the Modified Internal Rate of Return (MIRR) of theproject in Question 3, assuming your firm’s cost of capital is 7%.Question 3:  (Capital Structure)  4 pointsA consultant has collected the following informationregarding Hobbit Manufacturing:Operating income (EBIT) $600 million, Debt  $0, Interest expense $0, Tax rate 35%, Costof equity 7%, WACC 7% . The company has no growth opportunities (g = 0), so thecompany pays out all of its earnings as dividends .  Hobbit can borrow money  at a pre-tax rate of 5%. The consultantbelieves that if the company moves to a capital structure consisting of 30%debt and 70% equity (based on market values), which would require taking ondebt in the amount of $1,779.47 million, that the cost of equity will increaseto 8%  and the pre-tax cost of debt willremain at 6%, but the value of the firm will rise.  Is the consultant correct? If the companymakes this change, what will be the increase in total market value for thefirm? Question 4:  (Forecasting) 8 pointsJollyJoe’s Novelties, Inc. had the financial data shown below last year.  Jolly Joe’s has just invented a new toy whichthey expect will cause sales to double from $100,000 to $180,000, increasingnet income to $12,000.  From experience the company knows that when sales changes,all current assets plus accounts payable and accrued expenses change at thesame percentage rate, and the company feels they can handle the increasewithout adding any fixed assets. a. Will Jolly Joe’s need any new outsidefunding if they pay no dividends?  b. If so,how much will be needed?Question 5:  (Working Capital Management)  4 points Suppose it takes Jolly Joe’s Novelties, Inc. 5 days to buildand sell toys (on average).  Also supposeit takes the firm’s customers 35 days, on average, to pay for the toys afterthey have purchased them on credit. Finally, suppose the firm is able to delay paying for the materials ituses in the manufacturing process for 30 days. Given these conditions, how long is Jolly Joe’s cash conversion cycle?Question 6:  (Working Capital Management)  4 points If Jolly Joe’s buys $100 worth of supplies on credit withterms 3/10 n30 and pays the bill on the 28th day after the  purchase:  a. What is theapproximate, or “nominal,” cost of trade credit as an annual rate?  b. What is the exactcost of trade credit as an annual rate?MMUST SHOW ALL WORK………………………………………………….