Year A B

0

1 $10,000.00 $10,000.00

2 $16,773.12 $14,717.52

3 $25,774.36 $23,963.75

4 $43,582.00 $37,016.33

5 $84,537.85 $61,881.24

6 $102,588.93 $108,164.77

a) If your required rate of return was 8.55%pa, what would you pay for stock A and stock B?

b. What if your required rate of return was 10.65%pa?

c. What if your required rate of return was 7.85%pa

d. If A and B were projects and the required rate of return was 9.85%, which project would you undertake if your outlay for project A was $190,000 and for project B was $170,000?

e. As above (d), except the required rate of return is 8.35%pa? \

f. As above (d), except the required rate of return is 10.45%pa and the outlay for project A is $125,000 and project B is $135,000

g7. As above (d), except the required rate of return is 7.65%pa and the outlays for both project A and B is the same at $175,000