Suppose that you are approached with an offer to purchase an investment that will provide cash flows of $1,300 per year for 15 years. The cost of purchasing this investment is $9,200. You have an alternative investment opportunity, of equal risk, that will yield 9% per year. What is the NPV that makes you indifferent between the two options?

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10. The Claustrophobic Solution, Inc., a residential window and door manufacturer, has the following historical record of earnings per share (EPS) from 2011 to 2007:

	2011	2010	2009	2008	2007
EPS	$1.10	$1.05	$1.00	$0.95	$0.90

The companys payout ratio has been 60% over the last five years and the last quoted price of the firms share of stock was $12. Flotation costs for new equity will be 6%. The company has 32,000,000 of common shares of stock outstanding and a debt-equity ratio of 0.5.

If dividends are expected to grow at the same arithmetic average growth rate of the last five years, what is the dividend payment in 2012?

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11. The following are the company sales from 2000-2009

Year	Xylophone
1	$230
2	$573
3	$994
4	$1,683
5	$3,192
6	$6,140
7	$10,624
8	$16,549
9	$21,975

Fit an exponential trend curve to the data and

Calculate the projected sales in 2010,

2011,

2012.

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12. THE FINAL PROBLEM IS A CALCULATION PROBLEM with multiple parts

Frozen Turkeys Scenario

Cost of Land $ 210,000

Cost of Buildings & Equipment $ 325,000

MACRS Class 20

Life of Project (Years) 5

Terminal Value of Land $ 315,000

Terminal Value of Buildings & Equipment $ 170,000

First year sales (pounds) 250,000

Price per Pound $3.40

Unit Sales Growth Rate 7.5%

Variable Costs as % of Sales 65%

Fixed Costs 72,000

Tax Rate 33%

WACC 10.5%

a. Prepare a statement of annual cash flows for years 0 through 5. Cash flows in year 0 are your expenses for building and land.

Sales growth is based on the annual growth rate in units.

Assume no changes in fixed or variable costs.

Depreciate the project cost for 5 years, with the cash flow in year 5 to include the terminal cash flow of ending the investment.

b. Calculate the NPV,

c. profitability index,

d. IRR,

e. MIRR,

f. payback and

g. discounted payback of the cash flows

h Using scenario manager find best case, worst case, base case of NPV based on sales in pounds, price per pound, and variable cost percent. Make sure to include scenario summary.