| Metroplex Corporation will pay a $5.30 per share dividend next year. The company pledges to increase its dividend by 2.50 percent per year indefinitely. |
| Required: | If you require an 9.70 percent return on your investment, how much will you pay for the company's stock today? | P9-8 Calculating NPV [LO1] | A firm evaluates all of its projects by using the NPV decision rule. |
| Year | Cash Flow | | 0 | $27,000 | | 1 | 20,000 | | 2 | 14,000 | | 3 | 9,000 | | Required: | | (a) | At a required return of 20 percent, what is the NPV for this project? | | | | (Click to select)4,597.224,413.334,827.084,505.284,689.17 | | (b) | At a required return of 32 percent, what is the NPV for this project? | | | | (Click to select)95.5397.52104.4899.51101.5 | For the following set of cash flows, |
| Year | Cash Flow | | 0 | $9,200 | | 1 | 4,700 | | 2 | 3,600 | | 3 | 3,900 |
| Required: | | (a) | What is the NPV at a discount rate of 0 percent? | | | | (Click to select)$3,000.00$3,150$3,090$2,850$2,910 |
| (b) | What is the NPV at a discount rate of 9 percent? | | | | (Click to select)$1,153.49$1,095.82$1,188.09$1,211.16$1,118.89 |
| (c) | What is the NPV at a discount rate of 21 percent? | | | | (Click to select)$-622.64$-688.18$-655.41$-675.07$-721.45 | | (d) | What is the NPV at a discount rate of 26 percent? | | | What is the payback period for the following set of cash flows? |
| Year | Cash Flow | | 0 | $ 4,800 | | 1 | 2,700 | | 2 | 1,000 | | 3 | 1,500 | | 4 | 3,000 | What is the IRR of the following set of cash flows? |
| Year | Cash Flow | | 0 | $9,010 | | 1 | 3,300 | | 2 | 6,500 | | 3 | 4,600 | | The Jackson-Timberlake Wardrobe Co. just paid a dividend of $1.36 per share on its stock. The dividends are expected to grow at a constant rate of 6 percent per year indefinitely. |
| Required: | | (a) | If investors require a 13 percent return on The Jackson-Timberlake Wardrobe Co. stock, what is the current price? | | (Click to select)$7.16$21.01$19.43$20.59$20.18 | | (b) | What will the price be in 11 years? | | (Click to select)$39.88$39.09$38.31$13.59$36.88 | P9-9 Calculating NPV and IRR [LO1, 5] | A project that provides annual cash flows of $15,700 for 11 years costs $82,169 today. |
| Required: | | (a) | If the required return is 12 percent, what is the NPV for this project? | | (Click to select)$9,552.6$11,605.23$11,052.6$-80,659.95$10,499.97 | | (b) | Determine the IRR for this project. | | (Click to select)14.25%15.3%14.7%15%15.75% | Red, Inc., Yellow Corp., and Blue Company each will pay a dividend of $1.45 next year. The growth rate in dividends for all three companies is 7 percent. The required return for each company's stock is 9.40 percent, 11.90 percent, and 15.40 percent, respectively. |
| Required: | | (a) | What is the stock price for Red. Inc., Company? | | (Click to select)$8.84$20.71$60.42$15.43$4.35 | | (b) | What is the stock price for Yellow Corp. Company? | | (Click to select)12.18$4.35$29.59$20.71$7.67 | | (c) | What is the stock price for Blue Company? | | (Click to select)$9.42$6.47$17.26$4.35$20.71 | P8-2 Stock Values [LO1] | The next dividend payment by Hot Wings, Inc., will be $5.05 per share. The dividends are anticipated to maintain a 4 percent growth rate forever. |
| Required: | If the stock currently sells for $46 per share, what is the required return? | Metallica Bearings, Inc., is a young start-up company. No dividends will be paid on the stock over the next 13 years because the firm needs to plow back its earnings to fuel growth. The company will pay a $13 per share dividend in 14 years and will increase the dividend by 7 percent per year thereafter. |
