1. What is cost of capital? What does it represent? Why is it important to estimate cost of capital? Is cost of capital set by investors or managers?
2. Find the after-tax return to a corporation that buys a share of preferred stock at $41, sells it at year-end at $41, and receives a $5 year-end dividend. The firm is in the 30% tax bracket. (Round your answer to 2 decimal places.) After-tax rate of return:
3. If the cumulative net inflow for a project is -$500, and in the next year, inflows total $800 and outflows total $100, what is the cumulative net inflow at the end of the next year?