1. You are using both the payback and NPV decision rules. The payback threshold is 2 years. If a project has a payback of 5 years and an NPV of $1,000,000,000 then payback will say _______ the project and NPV will say _________ the project.
accept; accept
accept; reject
reject; accept
reject; reject
2. You expect a company to pay a constant $5 dividend for the next 10 years. In year 11 you expect the dividend to be $6, and you expect the dividend to grow thereafter (forever) at 4%. Your required rate of return on the stock is 10%. What is the most you will pay for a share of this company's stock today?
$44.83
$69.27
$88.91
$422.87