Question
1. The capital budgeting director of Sparrow Corporation is evaluating a project which costs $200,000, is expected to last for 10 years and produce after-tax
1. The capital budgeting director of Sparrow Corporation is evaluating a project which costs $200,000, is expected to last for 10 years and produce after-tax cash flows, including depreciation, of $40,000 per year. If the firm's required rate of return is 14 percent and its tax rate is 40 percent, what is the project's IRR? as a percentage
2. Andrea's opportunity cost rate is 11 percent compounded annually. How much must he deposit in an account today if she wants to receive $2,100 at the beginning of each of the next seven years?
a. $10,984
b. $10,998
c. $11,625
d. $11,887
e. $12,564
3. Oval Inc. has just paid a dividend of $2 per share on its common stock, and it expects this dividend to grow by 10 percent, indefinitely. The firm plans to issue common stock of $20. The firms investment bankers believe that the new issue of the common stock would have a flotation cost equal to 4 percent of the current market price. Which of the following is the cost of the newly issued common stock? ( round of answers to two decimal places).
a. 14.83 percent
b. 10.15 percent
c. 15.36 percent
d. 13.80 percent
e. 16.92 percent
4. A share of preferred stock pays a quarterly dividend of $2. If the price of this preferred stock is currently $50, what is the simple annual rate of return?
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