You calculated the Net Present Value (NPV) of a project to be $16,000.You realize that you forgot
Question:
You calculated the Net Present Value (NPV) of a project to be $16,000.You realize that you forgot to include cash flows of a computer you need for the project.
You will buy the computer immediately for $3,000. The computer will be depreciated using MACRS schedule as a 5-year property and will be worthless after 5 years. Assume that the first depreciation is realized immediately. The marginal tax rate is 20%. The cost of capital is 15%. Determine the incremental cash flows related to the computer, calculate their NPV, and Calculate the corrected NPV of the project.
A share of a stock will pay dividends of $2 after 1 year, $2.1 after two years, and $2.2 after three years. Dividends will grow at a fixed growth rate of g after that. Investors require a return of 15% from the stock. If the stock price is $20.25.
What is thevalue of the growth rate g?