Problem 7-40, Stormy Weather
Fundamentals of Corporate Finance
Brealey, Myers, and Marcus
10th Edition
Complete the table of growth rates, stock prices, and P/E ratios.
Complete the table of growth rates, stock prices, and P/E ratios.
At what price must Trend-Line’s stock be selling at? What part is due to assets in place and what part is due to growth opportunities?
Determine what the stock is likely to do, increase or decrease given earnings growth rates.
Determine the NPV of two projects, A and B given two timelines and an opportunity cost of capital. Then select whichever project is preferred.
Compute the IRR of two projects, A and B.
Compare the IRRs of projects A and B and determine whether or not the project with the higher IRR is actually the better one to choose.
Calculate the profitability index for Project A and the profitability index for Project B. Is the project with the better profitability index the better project to choose?
Given two timelines that are 4-years long, you are asked to determine the payback period for project A and project B.
Compute the payback periods for both projects and determine whether or not the project with the shorter or lower payback is actually the better project, meaning it has the highest NPV.
Compute the NPV of the project given its cost, annual cash flows, and discount rate. Then, determine the rate that would cause you to reject the project.