Teall Development Company hired you as a consultant to help them estimate its cost of capital. You have been provided with the following data: D₁ = $1.30; P₀ = $22.00; and g = 6.50% (constant). Based on the DCF approach, what is the cost of equity from retained earnings?

The CFO of Lenox Industries hired you as a consultant to help estimate its cost of capital. You have obtained the following data: (1) r_d = yield on the firm's bonds = 7.00% and the risk premium over its own debt cost = 4.00%. (2) r_RF = 5.00%, RP_M = 6.00%, and b = 1.50. (3) D₁ = $1.20, P₀ = $35.00, and g = 8.00% (constant). You were asked to estimate the cost of equity based on the three most commonly used methods and then to indicate the difference between the highest and lowest of these estimates. What is that difference?

Project X's IRR is 19% and Project Y's IRR is 17%. The projects have the same risk and the same lives, and each has constant cash flows during each year of their lives. If the WACC is 10%, Project Y has a higher NPV than X. Given this information, which of the following statements is CORRECT?

Westchester Corp. is considering two equally risky, mutually exclusive projects, both of which have normal cash flows. Project A has an IRR of 11%, while Project B's IRR is 14%. When the WACC is 8%, the projects have the same NPV. Given this information, which of the following statements is CORRECT?

Which of the following statements is CORRECT? Assume that the project being considered has normal cash flows, with one outflow followed by a series of inflows.

a. A project's NPV is found by compounding the cash inflows at the IRR to find the terminal value (TV), then discounting the TV at the WACC.

b. If a project's NPV is less than zero, then its IRR must be less than the WACC.

c. If a project's NPV is greater than zero, then its IRR must be less than zero.

d. The lower the WACC used to calculate it, the lower the calculated NPV will be.

e. The NPV of a relatively low-risk project should be found using a relatively high WACC.

Datta Computer Systems is considering a project that has the following cash flow data. What is the project's IRR? Note that a project's projected IRR can be less than the WACC (and even negative), in which case it will be rejected.

Year	0	1	2	3
Cash flows	-$1,070	$415	$435	$455