a-The stock of the company you have invested in sells at 70$/share. The total return you will be able to achieve comes from both the capital gains and divided yield. The company has stated that it will keep the same constant growth rate in its dividends. If your required rate of return is 10%, what is the current divided per share of this company?

b-You have decided to purchase a house near the coast in order to spend your summer vacations there in the future. To fulfill such an investment, three years from now you will start paying a 15-year annuity of thirty $5,000 semi-annual payments. The first payment will be made after 3.5 years. What is the current value of the annuity if the discount rate is 7%?

c-You have decided to purchase a house near the coast in order to spend your summer vacations there in the future. To fulfill such an investment, three years from now you will start paying a 15-year annuity of thirty $5,000 semi-annual payments. The first payment will be made after 3.5 years. What is the current value of the annuity if the discount rate is 7%?

d-

Consider the following two mutually exclusive projects (the required return on both projects is 15%):

Project A Project B

Year CFs CFs

0 $ (565,000) $ (231,000)

1 $ 197,000 $ 59,000

2 $ 281,000 $ 117,000

3 $ 297,000 $ 154,000

a. Which projects would you choose based on Payback method, NPV and Profitability index?

b. What would be your final decision and why?