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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