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Q2. Facebook paid its common stocks a dividend of $0.77 last year. The company expects growth to continue at 7% p.a. for the next
Q2. Facebook paid its common stocks a dividend of $0.77 last year. The company expects growth to continue at 7% p.a. for the next 2 years and 5% p.a. thereafter. What is the current price of the share? common shareholders' rate of return is 10% p.a. (Show your calculations) (2 Marks) Q3. Your company is looking at a project that requires a $50,000 investment. It is expected that the project will generate cash flows of $15,000 in year 1, $20,000 in year 2, $17,000 in year 3, and $13,000 in year 4. Using the NPV method, should the project be undertaken if your shareholders' required rate of return is 12%? (Show your calculations) (1.5 Marks)
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