Reference no: EM132291778
Question 1- The Heradless Company has just paid a dividend of $3/ share. The dividend of this company grows at a steady rate of 8 percent per year. What will the dividend be in five years?
Question 2- The next dividend for the Gormandon Company will be $4 / share. Investors require a 16 percent return on companies such as Gormandon. Gormandon dividend increases by 6 percent every year. What is the value of Gormandon's stock today? What is the value in 4 years?
Question 3- Chaction, Company., has been growing at a rate of 30 percent per year because. We believe this growth rate will last for 3 more years and will then go down to 10 % per year. If the growth rate then stays at 10 % indefinitely, what is the total value of the stock? Total dividends just paid were $5 million, and the required return is 20 percent.
Question 4- The Highf's dividend is expected to grow at rate of 20% for the next five years. After that, the growth is expected to be 4% forever. If the required return is 10 percent, what's the value of the stock? The dividend just paid was $2.
Question 5- We need to decide whether a new product should be launched. Based on projected sales and costs, we expect that the cash flows over the 5 year project life will be
$2,000 in the first 2 years, $4,000 in the next two, and $5,000 in the last year. Starting production will cost $10,000. Use discount rate of 10 percent to evaluate new products. What should we do here?
Question 6- The following are the projected cash flows from a proposed investment:
| Year |
Cash Flow |
| 1 |
$100 |
| 2 |
200 |
| 3 |
500 |
If this project costs about $500. What is the payback period for this investment?
Question 7- A project has a total investment cost of $435.44. The cash flows are $100, $200, and
$300 in first, second and the third year. What's the IRR? If we require an 18 percent return, should we go for this project?
Question 8- What is the profitability index for the following set of cash flows if the relevant discount rate is 10 percent? What if the discount rate is 15 percent? If it is 22 percent?
| Year |
Cash Flow |
| 0 |
- $18,000 |
| 1 |
10300 |
| 2 |
9200 |
| 3 |
5700 |
Question 9- Slow Ride Corp. is evaluating a project with the following cash flows:
| Year |
Cash Flow |
| 0 |
- $29,000 |
| 1 |
11200 |
| 2 |
13900 |
| 3 |
15800 |
| 4 |
12900 |
| 5 |
- 9400 |
The company uses a 10 percent interest rate on all of its projects. Calculate the MIRR of the project using all three methods.