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Use the following information for the next three problems, Year Cash Flow 1 $12,500 2 $14,000...

Use the following information for the next three problems,

Year

Cash Flow

1

$12,500

2

$14,000

3

$10,000

4

$11,000

5

$16,000

5. What is the NPV of above project if the initial investment was $35,000? Assume a cost of capital of 11%

6. Calculate the IRR assuming a cost of capital of 11%.

7. Calculate the MIRR of the project assuming a cost of capital of 11%. ___________________________________________________________________________

8. Suppose that you are approached with an offer to purchase an investment that will provide cash flows of $1,600 per year for 18 years. The cost of purchasing this investment is $9,200. You have an alternative investment opportunity, of equal risk, that will yield 9% per year. What is the NPV that makes you indifferent between the two options?

___________________________________________________________________

9. The Claustrophobic Solution, Inc., a residential window and door manufacturer, has the following historical record of earnings per share (EPS) from 2010 to 2018:

2018

2017

2016

2015

2014

2013

2012

2011

2010

EPS

$1.28

$1.22

$1.18

$1.13

$1.10

$1.05

$1.00

$0.95

$0.90





The company’s payout ratio has been 57% over the last nine years and the last quoted price of the firm’s share of stock was $15. Flotation costs for new equity will be 7%. The company has 34,000,000 of common shares of stock outstanding and a debt-equity ratio of 0.45.

If dividends are expected to grow at the same arithmetic average growth rate of the last nine years, what is the dividend payment per share in 2019?

_________________________________________________________________________-

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Date: / / Page no Praklem 5 Calculation of NPV of be project (Cost of Capital = 111.) aj Initial Inwestment $ 35.000 (Year o

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