Question

1.) This morning you purchased a stock that just paid an annual dividend of $2.90 per share. You require a return of 11.4 percent and the dividend will increase at an annual growth rate of 3.8 percent. If you sell this stock in three years, what will your capital gain be?

$1.51

$4.69

$6.14

$4.24

$3.80

2.)You are considering the following two mutually exclusive projects. The crossover rate between these two projects is ___ percent and Project ___ should be accepted if the required return is less than the crossover rate.

Year	Project A			Project B
0		?$25,000			?$25,000
1		9,000			17,080
2		9,000			7,000
3		17,000			9,100

18.12%; A

16.74%; B

16.74%; B

12.03%; B

12.03%; A

Answer 1