1.You are evaluating the purchase of HyperToys, Inc. common stock that just paid an annual dividend of $1.80. You expect the dividend to grow at a rate of 12% per year, indefinitely. You estimate that a required rate of return of 17.5% will be adequate compensation for this investment. Assuming that your analysis is correct and the company pays dividends once a year, what is the most that you would be willing to pay for the common stock if you were to purchase it today? Round to the nearest $.01.

2.You have been asked to analyze a capital investment proposal. The project's cost is $2,775,000. Cash inflows are projected to be $925,000 in Year 1; $1,000,000 in Year 2; $1,000,000 in Year 3; $1,000,000 in Year 4; and $1,225,000 in Year 5. Assume that your firm discounts projects of similar risk at 15.5%. What is the project's NPV?

3.An issue of common stock currently sells for $52.00 per share, has an expected annual dividend to be paid at the end of the year of $0.90 per share, and has an expected growth rate to infinity of 5.00% per year. The expected rate of return on this security is:

4.A project has an initial outlay of $5,000. It has a single payoff $30,000 at the end of Year 4. What is the IRR for the project (round to the nearest percent)?

5.The Absolute Armored Car can purchase a new vehicle for $89,000 that will provide annual net cash flow over the next five years of $26,000, $30,000, $40,000, $27,000, $29,000. The salvage value of the vehicle will be $5,000. Assume that the vehicle is sold at the end of year 5. Calculate the NPV of the new vehicle if the required rate of return is 13.00%. (Round your answer to the nearest $1.)

6.

Your company is capitalized as follows:

• Bank loan of $4B at a 12% annual effective interest rate
• Preferred Stock of $1B at a 14% annual dividend rate
• Common Stock with a market cap of $3B
• You estimate your shareholder's r_s (cost of equity or required rate of return) is 16%
• Your effective tax rate is 40%

What is your after-tax WACC?

7.Which of the following would be the best method of incorporating project risk into the capital budgeting decision?