Chapter 11b

Chapter 11b - Chapter 11b 1. Shopaholic Inc. is considering...

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Chapter 11b 1. Shopaholic Inc. is considering a project that has the following cash flows: Time 0: ($70) Time 1: $25 Time 2:$35 Time 3: $45 What is this project’s IRR? 2. You’re considering investing in common stock with the price of $50. It will pay dividends of $15, $30, and $15 over the next three years, then the company will liquidate and the stock will be worth nothing. What is this stock’s IRR? 3. You are going to start a lemonade stand that will give the following CF’s over the next 3 years (after which you will close the business and receive no more cash flows): Year 1: $10 Year 2: $15 Year 3: $30 This lemonade stand will require a $45 initial outlay at Time 0. What is the lemonade stand’s IRR? 4. Quiltoe’s Inc. is considering a project that will have the following cash flows: IO: ($15,000) Year 1: 350 Year 2: 700 Year 3 : 1,400 Year 4: 2,800 Year 5: 5,600 Year 6: 11,200 Year 7: 22,400 Quiltoe’s has a discount rate of 11%. What is this project’s NPV?
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5. You are considering buying common stock that will pay you dividends of $6.40, $12.10, $18.50, $20.10, $23.05, and $25. Your hurdle rate is 9% and the stock costs $40. What is the NPV of investing in this stock? 6.
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Chapter 11b - Chapter 11b 1. Shopaholic Inc. is considering...

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