1. A proposed project has an initial cost of $38,000 and cash inflows of $12,300, $24,200, and $16,100 for years 1 through 3, respectively. The required rate of return is 16.8 percent.
Based on IRR, should this project be accepted? Why or why not?
A. No; The IRR exceeds the required return by .58 percent.
B. No; The IRR is less than the required return by 1.03 percent.
C. Yes; The IRR exceeds the required return by .58 percent.
D. Yes; The IRR exceeds the required return by about 1.03 percent.
E. Yes; The IRR is less than the required return by .58 percent.
2. Arcs and Triangles just paid an annual dividend of $1.47 a share this year. The company is planning on paying $1.55, $1.63, and $1.65 a share over the next three years, respectively. After that, the dividend will be constant at $1.70 per share per year. What is the market price of this stock if the market rate of return is 11 percent?
A. $13.98
B. $14.07
C. $15.23
D. $17.16
E. $13.10