YouRock Nippster has a required rate of return of 13. The company is experiencing a highly abnormal growth rate of 30%. This growth rate is expected…

31.1.       YouRock Nippster has a required rate of return of 13.4%. The company is experiencing a highly abnormal growth rate of 30%. This growth rate is expected to continue for three years. After year three, the growth rate is expected to return to a normal 8% and remain constant forever. If the company’s last paid dividend was $1.15 what would be the market value (P0) for this supernormal growth rate stock?

(Points : 4)

       $25.32

       $33.42

       $39.21

       The question cannot be answered with the information given above

Question 32.

32.1.    Use the information given here to answer questions 32 and 33:

  CoveAuklaOoglu, Inc. is considering a project which has net cash flows (the same as free cash flows) given below:

Year                      CF ($)

0                                             -1,000 (Initial Outlay)

1                                               500

2                                               400

3                                               300

4                                               100

Given that the company’s WACC is 10%, what is the company’s NPV?

(Points : 3)

       $78.82

       $109.45

       $49.18

       $54.06

Question 33.

33.1.       Garrod Dickens wants to calculate the IRR for the above project for CoveAuklaOoglu, Inc. His answer based on the cash flows given in the previous question would be:

(Points : 3)

       11.8%

       14.5%

       12.45%

       13.02%