1. The discounting approach, the reinvestment approach, and the combination approach are three ways to calculate _____.
a) operating cash flows for a project.
b) depreciation using MACRS.
c) the modified internal rate of return.
d) the profitability index
2. Citi Group (C)’s current annual dividend is $4.80 per share, which has been growing at 10 percent each year for the past 3 years. If starting from this year, the dividend growth rate declines linearly to 4% over a 8-year period, and it stays at 4 percent into perpetuity thereafter. Assuming Citi's estimated cost of equity is 12%, please compute the fair price of Citi Group today.
A) $76.80
B) $14.40
C) $48.00
D) $62.40