Q3. A company's most recent dividend was $1.75 per share. Financial managers with the firm expects that the dividend will grow at a rate of 12% for the next 5 years, levelling off to a perpetual growth rate of 3% thereafter. If the required return is 8%, what should the current stock price be?

Q7. You are about to present a proposed capital investment project to your board of directors. The project has an NPV of $12,000 and an IRR of 12%. The firm's required return is 10%. You are to convey your proposal to the board in a one minute presentation, which will approximately fill the green shaded area below. A prominent board member is insisting that the decision should be made using the Payback method, because it is "simple, error-free, and much more reliable than these fancy discounted cash flow models." Remember, your job is to convince the board to either accept or reject the project, whichever you feel is appropriate given this information.

Q8. Calculate the NPV and IRR for the cash flows given below, using a required return of 11%. Discuss whether the IRR is reliable in this situation.

Year	Cash flow
0	$ (650,000)
1	$ 125,000
2	$ 150,000
3	$ 125,000
4	$ 100,000
5	$ 80,000

Q9. Magellen Industries is analyzing a new project and has asked you to calculate the project's net income in A. the worst-case scenario; and in B. the expected scenario; and in C. the best-case scenario. The company's CFO has gathered the following information:

	Lower bound	Expected value	Upper bound	*Note: values supplied in the following table are bounds, not cases.*
Sales quantity	9,500	10,000	10,500
Sales price/unit	$ 9.75	$ 10.00	$ 10.25
Variable cost/unit	$ 4.80	$ 5.20	$ 5.60
Fixed cost	$ 15,000	$ 18,000	$ 21,000
Depreciation: Straight-line to zero for the four-year life of the project, with no salvage value. PVCCATS does not apply.
Capital investment	$ 120,000
Required return	15%
Marginal tax rate	35%