1) Here are the cash flows for a project under consideration: C0 C1 C2 −$7,800 +$5,700 +$19,800 a) Calculate the project's net present value for discount rates of 0, 50%, and 100%

Finance Nov 08, 2020

1) Here are the cash flows for a project under consideration:

C₀ C₁ C₂

−$7,800 +$5,700 +$19,800

a) Calculate the project's net present value for discount rates of 0, 50%, and 100%. (Round your answers to the nearest whole dollar.)

?b) What is the IRR of the project? (Do not round intermediate calculations. Enter your answer as a whole percent.)

2) Roubecas Corporation just paid a dividend of $3.00 (Do). The expected growth rate is going to be 20% over the next 4 years (super normal growth). It will then grow at a normal, consistent rate of 5% for the foreseeable future. If Ke = 14%, what is Po right now?

Expert Solution

1- a) NPV at 0% discount rate = $17,700

NPV at 50% discount rate = $4,800

NPV at 100% discount rate = $0

b) IRR of the project = 100%

(AS the NPV is 0 at 100% discount rate so the IRR is 100%)

2) Current stock price (P0) = $56.64

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