A firm has the following data related to its stock. Calculate the Cost of Equity using the Dividend Discount Model (DDM).

Data:

• Current Dividend: $3.00
• Expected Dividend Growth Rate: 5%
• Current Stock Price: $50

Requirements:

1. Calculate the Cost of Equity using DDM.
2. Explain the significance of the Cost of Equity in investment decisions.
3. Calculate the dividend yield.
4. Calculate the expected price of the stock next year.

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Question 1

A company is evaluating an investment project with an initial investment of $200,000. The project's expected net cash flows are as follows:

Year	Cash Flows ($)	DF (10%)
1	50,000	0.909
2	60,000	0.826
3	70,000	0.751
4	80,000	0.683
5	90,000	0.621
Salvage Value	30,000	0.621

Requirements:

1. Calculate the Net Present Value (NPV) of the project.
2. Determine the Internal Rate of Return (IRR) for the project.
3. Calculate the discounted payback period.
4. Assess whether the project should be accepted based on the NPV and IRR.
5. Comment on the risk factors that could affect the project's cash flows.