1)

a) Tapley Acquisition Inc. is considering a new division. The division would require an initial investment of $19,000 today and generate after-tax net cash flows of $10,000 in year 1 and $13,000 in year 2. The cost of capital for Tapley is 15 percent. Should Tapley start the new division?

b)Anderson, Inc. is considering a project with cash flow from assets of $80,000 in year 1, $100,000 in year 2, and $150,000 in year 3. It expects the long term growth rate of cash flow from assets to be 2 percent after year 3. The weighted average cost of capital is 18 percent. Compute the value of this project today.

c) What is the present value of $1000 payments received at the beginning of each year for the next 10 years? Interest rate is 5 percent compounded annually.