1. Entrepreneurial Inc. is evaluating a new product launch that will cost it $29457 to launch. The company projects it will generate $640015 in annual operating cash flow at the end of each of the next 3 years, after which it will discontinue the product. The appropriate discount rate for the product is 15%.
If after the first year, the product is doing worse than expected, then the company projects annual cash flows will only be $456442 for the remaining two years of the project. What would be the value of the product line at that time (i.e. one year from now) in such a case?
a. $853348
b. $1040478
c. $848450
d. $742042
e. $712585
2. Suppose you received a total of $1233 in dividends plus $16070 in proceeds from selling 450 shares of Apple Inc. that you had bought at $29.96 a share. What is your capital gains yield on this stock?
a. 28.34%
b. 25.97%
c. 19.20%
d. 17.59%
e. 10.05%