You have just been hired as the CFO (chief financial officer) of D.W.O.T.T. Inc. Congratulations!!! I am so super proud of you! Now get to work!

You have lots to do because the last guy was lazy and good for nothing. Dont worry, you have his face on a dart board in your office. The president of the DWOTT has given you a fairly large to do list and wants it ASAP. So you load up on Monster Energy drinks and coffee and settle in to work. Its ok though, because you LOVE this stuff. Seriously. You do. Now that you are all jacked up on caffeine-lets get it done!

First on the presidents list is an evaluation of where the firm is at the present. He has provided you with all the information you need to find the answers he wants. For starters, the capital structure for the past year of operations is:

Mortgage bonds $2,000 Debentures 1,500 Retained earnings 500

DWOTT paid a dividend of $.80 last year and expects them to grow 15% next year and into the foreseeable future. The stock currently trades at $36.70.

The president has asked for a thorough analysis. Keeping in mind DWOTTscost of capital (use WACC above), what decision should be made regarding the projects above using each of the following tools(assume a 6% reinvestment rate):

What is each projects payback period and which would you choose? Timbuktu: Neverland: Middle Earth:

Choice & Why?