5. Pitchers Tent Co. just paid a dividend of $2.35 on its ordinary shares. Due to the release of an exciting new product, this company's dividends are expected to grow at a constant rate of 5 percent per annum indefinitely. If shareholders require a rate of return of 13 percent, what is the current value of each share? A. $15.80 B. $75.09 C. $30.84 D. $25.63 An investor's required rate of return is equal to: A. the risk premium the investor feels is necessary to compensate for the riskiness of the asset. the risk-free rate of interest plus a risk premium. B. C. the risk-free rate of interest. D. the risk-free rate of interest plus an inflation premium. 7. Which of the following is not a good feature of the payback period and the discounted payback period methods? A. Both methods are easy to visualise, are quickly understood, and easy to calculate. B. The methods can be used as a rough screening device. C. The methods emphasise the earliest returns. D. The methods deal with cash flows instead of accounting profits. 8. A project has an initial outlay of $4,000. It has a single payoff at the end of year 4 of $7,000. What is the internal rate of return (IRR) for the project (round to the nearest percent)? A. 16% B. 13% C. 21% D. 15% 9. If you put $1 500 in a savings account at the end of each year for 10 years and then allow the account to compound for an additional 15 years, how much will be in the account at the end of the 25th year? Assume that the account earns 12% per annum and round to the nearest $100. A. $212,500 B. $81,800 C. $144,100 D. $25,500 10. The discount rate used for making capital budgeting decisions should never be: A. the cost of a single source of financing. B. the firm's cost of capital. C. the firm's required rate of return. D. a hurdle rate for new investments. 6