Q1) Lobers Inc, has two investment proposals, which have the following characteristics

Project A

Period Cost Profit after tax Net cash flow

0 9000 ------ -------

1 1000 5000

2 1000 4000

4 1000 3000

Project B

Period Cost Profit after tax Net cash flow

0 12000 ------- --------

1 1000 5000

2 1000 5000

3 4000 8000

For each project, compute its payback period, its net present value, and its IRR using a discount rate of 15%.

Q2)

You are considering investing in ICI. Suppose ICI is currently undergoing expansion and is not expected to change its cash dividend while expanding for the next 4 years. This means that its current annual $3.00 dividend will remain for the next 4 years. After the expansion is completed, higher earnings are expected to result causing a 30% increase in dividends each year for 3 years. After these three years of 30% growth, the dividend growth rate is expected to be 2% per year forever. If the required return for ICI common stock is 11%, what is a share worth today?