Question 1: Big Apple Inc., is considering a major expansion of its product line and has estimated the following free cash flows associated with such an expansion. The initial outlay associated with the expansion would be $1,640,000, and the project would generate free cash flows of $640,000 per year for ten years. The appropriate required rate of return is 4 percent.

1. Please explain fully the payback period (PP), net present value (NPV), profitability index (PI) and internal rate of the return (IRR).
2. Calculate the payback period (PP).
3. Calculate the net present value (NPV).
4. Calculate the profitability index (PI).
5. Calculate the internal rate of return (IRR).
6. Should this project be accepted?
7. Please provide individually your consideration upon the project.

Question 2: A six-year government bond (Face value equals to $1,000) makes annual coupon payments of 5% and offers a yield of 3% annually compounded. Suppose that one year later the bond still yields 3%.

1. What is the bond and its main forms?
2. What return has the bondholder earned over the 12-month period?
3. Now suppose that the bond yields 2% at the end of the year.
4. What return would the bondholder earn in this case?
5. Please provide individually your own judgement upon the investment.

Question 3: Let say a company is experiencing a supernormal growth (non-constant growth) rate in cash dividends of 20% for each of the next 5 years. After that, the dividend growth rate is expected to be 5% per year forever. The latest annual dividend, is $0.75. The required return is 22%.

1. What is the stock and its main forms?
2. How much does the companys stock worth?
3. Please provide individually your own judgement upon the investment.