1. A project will produce cash inflows of $1,750 a year for four years. The project initially costs $10,600 to get started. In year five, the project will be closed and as a result should produce a cash inflow of $8,500. What is the net present value of this project if the required rate of return is 13.75%?
2. What is the net present value of a project that has an initial cash outflow of $-11,500, at time 0, and the following cash flows for years 1-4? The required return is 10.0%.
Year Cash Flows
1 $-1,500
2 $11,000
3 $11,000
4 $11,000
3. What would you pay for a stock which just paid a dividend of $1.70 if the expected dividend growth rate is 4% and you require a 10% return on your investment?