Reference no: EM131168137
1. James Loose, Incorporations common stock paid a Rs.12 annual dividend per share and had a closing price of Rs.125. Let's suppose that the market expects this company's annual dividend to grow at a constant 8 percent rate forever.
Required:
a. What will be the implied yield on this common stock?
b. What will be the expected dividend and capital gain yield on this common stock?
2. The Acme Blivet Company is considering a new product line to supplement its range line. It is forecasted that the new product line will involve cash investment of Rs.1.2 million at time 0 and Rs. 0.8 million in year 1. After-tax cash inflows of Rs.400, 000 are expected in year 2, Rs.455,000 in year 3, Rs.510,000 in year 4,and Rs.520,000 each year thereafter through year 10.Though the product line might be viable after year 10,the company prefers to be conservative and end all calculations at that time.
Required:
a. Calculate the Internal rate of return of the proposed project.
b. Also calculate the project's payback period.
Instructions:
- Use a 12-point font in Times New Roman.
- Show all the necessary calculations because it carries considerable marks.
- This Assignment covers Lecture 23 to Lecture 27 of your course.