Problem 5: Your firm is considering a project with the above described cash flows. The firm has a weighted average cost of capital of 7%.
A. What is the project's IRR? Should the firm accept or reject the project? Why or why not?
B. Using the best capital budgeting metric, should the firm accept or reject the project? Why or why not?
Problem 6 (10 points) Your firm just paid a $1.75 dividend per share. Dividends are expected to grow by 6% for three years before leveling off to a constant growth rate of 3%. Investors require a 9% return on their investment. How much should you pay for the stock today?
(Is there a way to solve these without a financial calculator/ excel functions?)
a) IRR = 19.17% > discount rate... View the full answer