1. Pavlin Corp.'s projected capital budget is $2,000,000, its target capital structure is 40% debt and 60% equity, and its forecasted net income is $1,150,000. If the company follows the residual dividend model, how much dividends will it pay or, alternatively, how much new stock must it issue?
a. $0; $50,000
b. $52,500; $56,000
c. $52,500; $50,500
d. $40,500; $48,500
e. $42,500; $39,500
2. Within the WACC
a. The risk-free rate is usually higher than the return in the market
b. The higher the beta, the lower the required rate of return
c. Beta measures the volatility of an individual stock relative to a stock market index
d. Two of the options
3. Compute the PI statistic for Project Z if the appropriate cost of capital is 7 percent. (Do not round intermediate calculations. Round your final answer to 2 decimal places.) Project Z Time: 0 1 2 3 4 5 Cash flow –$1,100 $370 $500 $670 $320 $120 PI Should the project be accepted or rejected? Accepted Rejected