Question: Please explain both without using MS Excel 1. You are offered a chance to buy (cash outflow) an asset for $200,000 that is expected to
Please explain both without using MS Excel
1. You are offered a chance to buy (cash outflow) an asset for $200,000 that is expected to produce cash inflows of $100,000 at the end of Year 1, $77,000 at the end of Year 2, $52,000 at the end of Year 3, and $40,000 at the end of Year 4. What rate of return (IRR) would you earn if you bought this asset?
2. Durmush Technologies was founded 8 years ago in NIGDE. It has been profitable for the last 5 years, but it has needed all of its earnings to support growth and thus has never paid a dividend. Management has indicated that it plans to pay a $0.25 dividend 3 years from today, then to increase it at a relatively rapid rate for 2 years, and then to increase it at a constant rate of 8.00% thereafter. Management's forecast of the future dividend stream, along with the forecasted growth rates, is shown below. Assuming a required return of 11.00%, what is your estimate of the stock's current value?
| Year | 0 | 1 | 2 | 3 | 4 | 5 | 6 |
| Growth rate | NA | NA | NA | NA | 30.00% | 15.00% | 8.00% |
| Dividends | $0.000 | $0.000 | $0.000 | $0.250 | $0.325 | $0.374 | $0.404 |
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