Question

BIRR ad N e AAR and IRR D) IRR and payback E) NPV and PI 15) Suppose you can confidently predict that the share price of Snakehole Lounge Company will be $300 two years from now. Over the next two years, Snakehole Lounge will pay a $15-per-share yearly dividend. If the annualized required return is 20%, what is the price you are willing to pay for one share today? Ne 2 T-20% PMT-15 FV-B300 PV:? A) $315.00 B) $231.25 C) $262.50 D) $323.50 E) $265.75 (300 fMs)here/ 16) A project has an initial cash outflow of $39,800 and produces cash inflows of $18,304, $19,516, and $14,280 for years 1 through 3, respectively. What is the NPV at a discount rate of 11 percent? A) $1,311.16 B) $2,029.09 C) $7,675.95 D) -$1,208.19 E) $2,971.13 ent firm, you have been assigned to cover ensive analysis, you the

help on 15 please

Answer 1

Answer to Question No. 15

Price in 2 years, P2 = $300
Dividend in 1 year, D1 = $15
Dividend in 2 years, D2 = $15
Required Return, rs = 20%

Using formula:

Current Price, P0 = D1 / (1 + rs) + D2 / (1 + rs)^2 + P2 / (1 + rs)^2
Current Price, P0 = $15 / 1.20 + $15 / 1.20^2 + $300 / 1.20^2
Current Price, P0 = $231.25

Using financial calculator:

I = 20%
N = 2
PMT = 15
FV = 300

PV = -231.25

Option B is Correct.