Question 1: Using the constant growth model, a firm's expected (D1) dividend yield is 3% of the stock price, and it's growth rate is 7%. If the tax rate is .35%, what is the firm's cost of equity?
Question 2: Assume a corporation has earnings before depreciation and taxes of $100,000, depreciation of $40,000, and that it has a 30 percent tax bracket. What are the after-tax cash flows for the company?
Question 3: You buy a new piece of equipment for $5,535, and you receive a cash inflow of $1,000 per year for 8 years. What is the internal rate of return?
a) less than 10%
b) between 10% and 11%
c) between 11% and 12%
d) more than 12%
Question 4: Stone Inc. is evaluating a project with an initial cost of $8,450. Cash inflows are expected to be $1,000, $1,000 and $10,000 in the three years over which the project will produce cash flows. If the discount rate is 13%, what is the net present value of the project?
a) less than $0
b) between $0 and $400
c) between $400 and $800
d) more than $800