1) Solar Energy is currently examining a project that will produce cash inflows of $20,264 a year for two years followed by $13,355 in year 3. The cost of the project is $39,105. What is the profitability index if the discount rate is 9 percent?
2) Delta Mu Delta just paid its annual dividend of $7 a share. The firm recently announced that all future dividends will be increased by 4% annually. What is one share of this stock worth to you if you require a 10% rate of return?
3) Alisha can afford car payments of $264 a month for 60 months. The bank will lend her money to buy a car at 6% APR compounded monthly (0.5% per month). How much money can he afford to borrow?
4) Breakfast Hut pays a constant annual dividend of $6 per share. How much are you willing to pay for one share if you require a 10 percent rate of return?
5) You are making an initial investment of $135,082 and require a rate of return of 14 percent. You expect to receive $39,574 in the first year, $46,856 in the second year, and $50,788 in the third year. The project will be closed out at the end of the third year. What is the net present value of this investment?