Problems: (show all work)

1. The initial outlay and net cash flows are projected for a project. Your required rate of return is 12%

Project A Initial Outlay: - $150,000 Cash Flow
Year 1	Year 2	Year 3	Year 4	Year 5
$20,000	$30,000	$40,000	$50,000	$60,000

1. Calculate the payback period for project (approximate is OK)
2. Calculate the NPV
3. Calculate the IRR
4. Should the investment be made? Why or Why not?

2. a. What is the market price of a $1,000 bond that has a coupon rate (interest) of 6%, matures in 10 years, with your required rate of return being 8%______

b. is the bond selling at discount or premium? _____

3. Jim has a convertible bond valued at $900 with a conversation ratio of 30 each. The price of the stock is @ $ 40.
   1. What is the conversion value of her bond?
   2. Should she convert?

4. What is the value of a preferred stock with dividends of $10 per share and a required rate return of 12%?
5. What is the current market price of a common stock paying dividends of $8 per share, with dividend growth at 3% per year and your required rate of return set at 14%?
6. Company ABC has 20,000 shares outstanding with market price of $20.
7. What is the market capitalization of the company?
8. Company declares a 10% stock dividend
   1. What is the new # of shares outstanding?
   2. What is the new market price of the stock?

9. C. Using same (original) data above, if company declares a 4 for 1 stock split.

10. What is the new # of shares outstanding?
11. What is the new market price of the stock?