1. Using the table above, what is the maximum that an investor should be willing to pay for the share of common stock?

2. Sally was contemplating the purchase of a stock priced at $55/share, but is unsure if it is appropriately priced. Analysts expect the stock to generate 30% return. The stock has a beta coefficient of 2.2. The expected market return is 8% and the 20-year Treasury Bond is yielding 5%. Help Sally determine if the stock is overpriced or underpriced at $55/shr. Show the work to support your answer.

3. A 30-year bond pays interest semiannually, has a par value of $1,000, a coupon rate of 15%, and has 20 years until maturity. The bond has a feature that allows the bond to be called after 15 years, with a call premium of 1.5 years of interest. Bonds of similar risk are discounted at a market rate of 5%.

a) What is the value of the bond if the market does not expect the bond to be called?

b) What is the value of the bond, if the market expects the bond to be called? How does this condition affect its price?

4. On Wednesday, May 4, 2022, an 7% bond issued by XYZ has 20 years until maturity and closed at $1050. If the bond has a face value of $1000 and pays interest semi-annually, what is the bond's yield to maturity?

5. You are considering a project that will require an initial outlay of $64,200. This project has an expected life of 5 years and will generate after-tax flows to the company as a whole of $20,608 at the end of each year over its 5-year life. In addition to the $20, 608 cash flow from operations during the fifth and final year, there will be an additional cash outflow of $23,608 at the end of the fifth and final year associated with the removal of environmental waste, making the cash flow in year 5 equal to $-3,000. Given a required rate of return of 15 %, choose an appropriate capital budgeting technique to determine if this project should be accepted.