Cashmule, Inc. has established itself as a leader in a market that is becoming more competitive. Analysts expect it to pay an annual dividend (per share) of $12.40 next year. Given the increase in competition, analysts believe that this (annual) dividend will shrink over the following next few years, by $0.40 per year, until year 7. After year 7, analysts expect the dividend to remain constant indefinitely. What is the value of one share, if investors expect returns of 13% for this type of dividend stream?

2. Your firm is considering an expansion of its operations into a nearby geographic area that the firm is currently not serving. This would require an up-front investment (startup cost) of $989,060.00, to be made immediately. Here are the forecasts that were prepared for this project: Year CF 0 -989,060.00 1 70,120.00 2 74,411.34 3 80,937.22 4 89,896.97 The long-term growth rate for cash flows after year 4 is expected to be 4.73%. The cost of capital appropriate for this project is 12.48%. Prepare a detailed and concrete recommendation, explaining whether the firm should go ahead with this project, and why. Provide all information that your superiors may want to see.

3. Your firm's Marketing and Operations departments are proposing the creation of a new product line. This would require an up-front investment (startup cost) of $1,013,723, to be made immediately. Here are the forecasts that were prepared for this project: Year CF 0 -1,013,723 1 86,039 2 87,123 3 91,357 4 95,258 5 98,383 6 100,075 The long-term growth rate for cash flows after year 6 is expected to be 2.75%. The cost of capital appropriate for this project is 9.22%. Prepare a detailed and concrete recommendation, explaining whether the firm should go ahead with this project, and why. Provide all information that your superiors may want to see.

4. The new product line described in Question 3 could be operated as a stand-alone business, organized as a separate company (a subsidiary) owned by your firm. If the startup investment is made today, then the operations start tomorrow. What would be the value of the new operations tomorrow morning, right after production has started? Or, equivalently, tonight, after the investment is made but before the operations start.