What is the net present value of the machine

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Reference no: EM132036778

1. A firm does not pay a dividend. It is expected to pay its first dividend of $0.54 per share in two years. This dividend will grow at 14 percent indefinitely. Use a 15.5 percent discount rate.

2. Compute the value of this stock. (Round your answer to 2 decimal places.)

-0.75

0.50

0.25

Impossible to know

-0.25

3. A company is considering investing in a new product line. The cost of the machine is $11900. Normally, the compay has a 6.00% cost of capital. Because this new product line is more risky, the company has decided to charge an additional risk premium of 1.10%. What is the Net Present Value of the machine if it produces the following cash flows?

Year 1 $6000

Year 2 $4200

Year 3 $3300

Year 4 $2600

Reference no: EM132036778

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