8. Individual R is considering two investments. Each will cost $20,000 initially. Project 1 will return annual cash flows of $10,000 in each of three years. Project 2 will return $5,000 in year 1,...

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9th Question

Extracted text: 8. Individual R is considering two investments. Each will cost $20,000 initially. Project 1 will return annual cash flows of $10,000 in each of three years. Project 2 will return $5,000 in year 1, $10,000 in year 2, and $15,000 in year 3. Roman requires a minimum rate of return of 10%. What is the NPV of Project 1, Project 2,? Which project must be selected? (round off to the nearest tens). $20,000; $20,220; Project 2 $25,670; $24,520; Project 2 $4,870; $4,080; Project 1 $22,530; $22,510; Project 1 9. You are planning to invest in common stock of Company B. Lately, the firm paid a dividend of $7.80. You have projected that the dividends will grow at a rate of 9.00% per year indefinitely. If you want an annual return of 24.00%, what is the most you should pay for a stock now? $52.00 $56.68 $32.50 $35.43 10. Determine the value of a put option using the following information: Risk free rate = 6% Time to maturity = 3 months Call price = $5 Stock price = $30 Strike price = $28 Values are discounted at the continuously compounded risk-free rate. $7.42 $4.55 $2.58 $6.55