1. New company stock currently sells for $15 a share it just paid a dividend of $.75 a share. The dividend is expected to grow at a constant rate of 7% a year. What is the stock price expected one year from now?
2. Which of the following statements is false?
NPV is positive only for discount rates greater than the internal rate of return
To decide whether to invest using the NPV rule, we need to know the cost of capital.
If you are unsure of your cost of capital estimate, it is important to determine how sensitive your analysis is to errors in this estimate.
About 75% of firms surveyed used the NPV rule for making investment decisions.