7. What is the fair market value of a stock that has a required rate of return of 12%, paid $2 per share last year in dividends and expects its dividends to grow at a constant rate of 5% per year?
8. Your company plans to acquire a new molding machine which can generate these net incremental year-end cash flows for the next 5 years, the lifespan of the machine: $26,000, $32,000, $35,000, $35,000, and $30,000. The cost of funds for your company is 15% and the machine sells for $100,000. What is the machines Internal Rate of Return (IRR) and, based on the IRR, is the purchase justified financially?