1. The common stock of a particular company is selling for $16 a share and has a dividend yield of 3.5 percent. What is the dividend amount? Begin with the general formula.

2. A bond has a face value of $1,000 and two years to maturity. It has a coupon rate of 4.50% per year and coupons are paid every six months. The current market yield is 6.00%. What is the bonds price today? Use the bond pricing formula (discounting of future cash flows). Show all your work.

3. Chance, Inc. is considering a project with an initial cost of $1 million. The project will not produce any cash flows for the first two years. Starting at the end of year 3, the project will produce cash inflows of $625,000 a year for four years and will then be discontinued. This project is risky, so the firm has assigned it a discount rate of 20 percent. What is the net present value?

4. A company follows the policy of paying out 60% of its earnings per share (EPS) to shareholders as dividends. These dividends have been growing at 4% per year and are expected to continue to grow at 4% per year for the foreseeable future. The amount for todays earnings per share is $1.20. The discount rate is 12%.

a. What is the value of the firms stock today? Begin with a general formula.

b. What is the stocks dividend yield today? Begin with the general formula.