1. A firm is scheduled to earn $3.45 per share over the next year. Since the firm has an ROE of 14.1%, which is greater than the capitalization rate of 8.51% estimated using CAPM, management has decided to reinvest 39% of the firm's earnings back into the firm in order to generate future growth. Whatever the firm does not reinvest into the business it pays as dividends to shareholders. Calculate the firm's PVGO.
2. A capital budgeting project is projected to have cash inflows over the subsequent three years of $70, $50, and $108 respectively. With a cost of capital of 900, an NPV of $14.70 is computed for the project. What is its IRR?