Rearden Metals expects to have earnings this coming year of $2.50 per share. Rearden plans to retain all of its earnings for the next year. For the subsequent three years, the firm will retain 50% of its earnings. It will ten retain 25% of its earnings from that point onward. Each year, retained earnings will be invested in new projects with an expected return of 20% per year. Any earnings that are not retained will be paid out as dividends. Assume Rearden's shares outstanding remains constant and all earnings growth comes from the investment of retained earnings. If Rearden's equity cost of capital is 10%, then Rearden's stock price is closest to

A) $40.8

B) $44.6

C) $46.8

D) $48.5

E) $59.8

F) $63.5

Suppose that a young couple has just had their first baby and they wish to insure that enough money will be available to pay for their child's college education. They decide to make deposits into an educational savings account on each of their daughter's birthdays, starting with her first birthday. Assume that the educational savings account will return a constant 7%. The parents deposit $2000 on their daughter's first birthday and plan to increase the size of their deposits by 5% each year.

Assuming that the parents have already made the deposit for their daughter's 18th birthday, then the amount available for the daughter's college expenses on her 18th birthday is_________

Your firm needs to invest in a new delivery truck. The life expectancy of the delivery truck is five years. You can purchase a new delivery truck for an upfront cost of $200,000, or you can lease a truck from the manufacturer for five years for a monthly lease payment of $4000 (paid at the end of each month). Your firm can borrow at 6% APR with quarterly compounding.

The effective monthly discount rate that you should use to evaluate the truck lease is__________

Your buddy in mechanical engineering has invented a money machine. The main drawback of the machine is that it is slow. It takes one year to manufacture $1,200. However, once built, the machine will last forever and will require no maintenance. The amount of produced money will furthermore increase every year by 1%. The machine takes one year to build and it will cost $30,000 to build. Your buddy wants to know if he should invest the money to construct it. If the interest rate is 4.0% per year, what should your buddy do?

To make the decision you need to calculate the net present value (NPV) of the machine.

The NPV of the machine is $____________

Five years ago you took out a 10-year amortizing loan to purchase an apartment. The loan has 7.2% APR with monthly payments of $2000. How much do you owe on the loan today?

How much interest did you pay on the loan in the past year?

The interest paid in year five was $___________

Over the entire period of 10 years, how much interest will you have paid on the loan?

The total amount of interest paid on the loan will be $____________

Epiphany Industries is considering a new capital budgeting project that will last for three years. Epiphany plans on using a cost of capital of 12% to evaluate this project. Based on extensive research, it has prepared the following incremental cash flow projects (in $):

Year	0	1	2	3
Sales (Revenues)		100,000	100,000	100,000
- Cost of Goods Sold (50% of Sales)		50,000	50,000	50,000
- Depreciation		30,000	30,000	30,000
= EBIT		20,000	20,000	20,000
- Taxes (35%)		7,000	7,000	7,000
= unlevered net income		13,000	13,000	13,000
+ Depreciation		30,000	30,000	30,000
+ changes to working capital		-5,000	-5,000	10,000
- capital expenditures	-90,000

The NPV of the Epiphany's project is $_____________