Question 1. Calculate the internal rate of return on the following projects. Make sure to include all calculator key strokes or show Excel worksheet calculations.
A. Initial outlay of $50,000 with an after-tax cash flow of $10,000 per year for eight years
B. Initial outlay of $600,000 with an after-tax cash flow of $120,000 per year for ten years
C. Initial outlay of $25,000 with an after-tax cash flow $11,500 per year for three years
Question 2. The risk-free rate of interest is 4% and the market risk premium is 7%. Hughes Corporation has a beta of 1.3, and last year generated a return of 11% with a standard deviation of returns of 15%. The required return on Hughes Corporation stock is:
A) 13.1%
B) 12.2%
C) 11%
D) 11.5%
Show all formulas and steps so that the logic behind each problem can be understood.