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Textile Mills: What to pay for a share of stock; NPV of a project

3. The common stock of Textile Mills pays an annual dividend of $1.65 a share. The company has promised to maintain a constant dividend even though economic times are tough. How much are you willing to pay for one share of this stock if you want to earn a 12 percent annual return?

A) $13.75

B) $14.01

C) $14.56

D) $14.79

4. What is the net present value of a project with the following cash flows if the required rate of return is 12 percent?

Year Cash Flow
0 -42,398
1 13,407
2 21,219
3 17,800

A) -$1,574.41

B) -$1,208.19

C) -$842.12

D) $729.09

Solution Preview

3. The common stock of Textile Mills pays an annual dividend of $1.65 a share. The company has promised to maintain a constant dividend even though economic times are tough. How much are you willing to pay for one share of this stock if you want to earn a 12 percent annual return?

A) $13.75 ...

Solution Summary

The expert determines what to pay for a share of stock and NPV of projects for Textile Mills.

$2.19