1. If your required rate of return was 8.25%pa, what wouldyou pay for stock A and stock B?

2. What if your required rate of return was 10.5%pa?

3. What if your required rate of return was 7.5%pa

4. If A and B were projects and the required rate of return was9.8%, which project would you undertake if your outlay forproject A was $190,000 and for project B was $170,000?

5. As above, except the required rate of return is 8.25%pa?

6. As above, except the required rate of return is 10.75%paand the outlay for project A is $125,000 and project B is$135,000

7. As above except the required rate of return is 7.75%pa andthe outlays for both project A and B is the same at $175,000

Year A B

0

1 $10,000.00 $10,000.00

2 $16,773.12 $14,717.52

3 $25,774.36 $23,963.75

4 $43,582.00 $37,016.33

5 $84,537.85 $61,881.24

6 $102,588.93 $108,164.77

Answer rating: 100% (QA)

To answer the questions we need to calculate the present value of the cash flows for each stock using the given required rate of return The present va... View the full answer