1) The stock of Most Excellent Inc. paid a dividend last period of $2. Most Excellent is expected to grow at a constant rate of 4% in the future.

                                   16.95

Unit variable cost                                   12.80

Fixed costs                                            27,000

Depreciation                                          12,000

OCF at the point where NPV is zero         14,500

Cash Break-even _______________

Accounting Break-even ____________

Financial Break-even ____________

3) 

 Ultimate Security Company is experiencing supernormal growth.  Over the next two years dividends are expected to be 4.50 and 5.50.  After that, growth is expected to be constant at 5%.  The going rate in the market place for investments of similar risk is 7%.  What is the value of a share of Ultimate Security Company right now?

Value of share ________________

4) 

Calculate the net present value of the following project and determine if it should be accepted or rejected:

Initial investment           65,000

Income in year 1             20,000

Income in year 2            25,000

Investment in year 3       10,000

Income in year 4            35,000

Discount rate                    8%

NPV ______________   Accept or Reject _______________

5) 

The following project is being considered by Bananas and Things, a produce wholesaler.  The board of Bananas is very uncertain about the future of the produce market, so they have decided to accept no capital projects that will pay back in more than three years.  Calculate the payback period using the Payback Method and the Discounted Payback Method.  Will the project be accepted or rejected using each method?

Payback Method ____________ Accept or Reject ____________

Discounted Payback Method ____________ Accept or Reject ____________

Discount rate                 9%

Initial investment           50,000

Income in year 1             15,000

Income in year 2            20,000

Income in year 3            20,000