1. A project costing $1 million is expected to save $300,000/yr for 4 years. What is the...

Question:

1. A project costing $1 million is expected to save $300,000/yr for 4 years. What is the simple payback, NPV, and IRR.

2. Would you prefer to invest in a project with a high IRR, or low IRR? Why?

3. A construction company is considering spending $100,000 in some new safety equipment. Where would it expect to see some savings that it could put into the capital budgeting analysis?

4. A share of common stock is selling for $20; its most recent dividend was $1, and dividends have been growing at 5%. If I am willing to pay the $20, what does that imply my E[r] is?

5. A 6%, $1000, 30 year bond, that was issued 10 years ago, is selling for $980. If I 'm willing to pay that much, what does that mean my E[r] or YTM is?

Common Stock
Common stock is an equity component that represents the worth of stock owned by the shareholders of the company. The common stock represents the par value of the shares outstanding at a balance sheet date. Public companies can trade their stocks on... Capital Budgeting
Capital budgeting is a practice or method of analyzing investment decisions in capital expenditure, which is incurred at a point of time but benefits are yielded in future usually after one year or more, and incurred to obtain or improve the... Dividend
A dividend is a distribution of a portion of company’s earnings, decided and managed by the company’s board of directors, and paid to the shareholders. Dividends are given on the shares. It is a token reward paid to the shareholders for their...