Q No. 1 Explain why you agree or disagree with the following statements. The answer should not be more than 3 sentences (Total 3 Statements, Total Marks 6, Each Statement 2 Marks).

1. Treasury bonds are riskier than corporate bonds.
2. All other things held constant; the future value of an ordinary annuity is always having a higher future value than annuity due.
3. All other things held constant, the price or interest rate risk of short-term bond is always lower than long-term bond.

Q No. 2 Being a newly appointed analyst at Credit Suisse, one of your prime role is to facilitate the Global head of valuations in providing detailed and timely analysis. The next meeting is being scheduled for the upcoming Saturday, and you are required to calculate the price of a few stocks and provide their valuations. The information is mentioned below:

1. What would be the expected price of Travelers stock today, given the streams of future dividends of $4 for next 3 years, having ZERO growth rate, and 10% required rate of return?
2. The Walgreens Boots Alliance Company has recently paid dividend D₀ = $3, and growth is expected to remain 5% throughout. The required rate of return is 10%. Calculate dividend streams for the next 2 years, and their PVs?
3. You have forecasted NIKE dividends of $5, $5.70, and $5.95 over the next three years respectively. After the end of three years the anticipated selling market price of NIKE will be $135. What is NIKE stock price provided a 7% expected rate of return?

Q No. 3 A construction company is deciding to undertake a project. The project is quite profitable as it will generate net cash inflows of $20 million per year for 5 years. However, it will cause pollution to the nearby residents. The company can mitigate this pollution by investing additional 10 million at Year 0 but legally it is not compulsory for it to do so. Undertaking this project would cost $60 million without mitigation. If the firm does invest in mitigation, the annual cash inflows would be $22 million. The risk adjusted WACC is 12%.

1. Calculate the NPV and IRR with and without mitigation.
2. Should the project be undertaken? If so, should the firm do mitigation?