1) Horse and Buggy Inc. is in a declining industry. Sales, earnings, and dividends are all shrinking at a rate of 10% per year. (1,5 points) a) If r=15% and DIV =$3, what is the value of a share? b) What price do you forecast fort he stock next year? c) What is the expected rate of return on the stock? 2) A company will pay a $2 per share dividend in 1 year. The dividend in 2 years will be $4 per share, and it is expected tht dividends will grow at 5% per year thereafter. The expected rate of return on the stock is 12%. (2 points) a) What is the current price of the stock? b) What is the expected price of the stock in a year? c) Show that the expected return, 128, equals dividend yield plus capital appreciation. 3) If you insulate your Office for $10,000, you will save $1,000 a year in heating expenses. These savings will last forever. (1,5 points) a) What is the NPV of the investment when the cost of capital is 8%? b) What if it is 10%? c) What is the IRR of the investment? d) What is the payback period on this investment