1. Andover Engineering is evaluating a project that will increase sales by $2,780,000 and costs by $1,634,000. The project will initially cost $4,200,000 for fixed assets that will be depreciated straight-line to a zero book value over the 10-year life of the project. The applicable tax rate is 34 percent. What is the annual operating cash flow for this project?
$899,160
$726,000
$684,320
$642,916
$568,300
2. The common stock of Chelmsford Chemicals sells for $48.50 a share. The stock is expected to pay $1.40 per share next year when the annual dividend is distributed. Chelmsford Chemicals has established a pattern of increasing its dividends by 5% annually and expects to continue doing so. What is the market rate of return on this stock?
11.14%
7.89%
10.73%
9.51%
8.67%