1. Rose Hill Trading Company is expected to have EPS in the upcoming year of $8. The expected ROE is 18%. An appropriate required return on the stock is 14%. If the firm has a plowback ratio of 70%, its dividend in the upcoming year should be _________.
$1.44
$2.40
$1.12
$5.60
2. Your firm is considering an overseas expansion. Below is the information that you have been given regarding the project: Initial Equipment Cost: $100m. Life of System: 5 years. Depreciation method: Straight line Depreciation. Expected overseas sales: $115m per year. Raw materials: $70m per year. Salaries for new workers: $20m per year. Net Working Capital necessary for plant to operate effectively: $25m (assume that this investment is required at the start of the project and is recovered when the plant shuts down after 5 years.) Marginal Tax Rate on income and capital gains: 40% Expected salvage value of equipment after 5 years: $30m. What will be the cash flows of this project in millions?
A) -100/9.1/9.1/9.1/9.1/28.6
B) -100/26.5/26.5/26.5/26.5/81.5
C) -125/23/23/23/23/78
D) -125/32/32/32/32/75
E) -125/23/23/23/23/66