1. Alexander Stan plans to invest $1.5 million in a project today. The project is expected to pay $200,000 per year in perpetuity. The cost of capital is 8 percent. Will Stan benefit by investing in the project, as judged by the NPV rule?

A. No, the project is not worth the investment.
B. Yes, the project is worth the investment.
C. Additional information is required for the decision.

 

2. Donna Dewberry buys 120 shares of EFL at a price of $75 per share on January 1, 2011. On January 1, 2012, after receiving a dividend of $5 per share, Dewberry sells 60 shares at a price of $80 each. On January 1, 2013, Dewberry receives a dividend of $5 per share on the remaining shares and then sells all of them at $82 each. Which of the following is most likely the money weighted return on Dewberry’s portfolio?

A. 11.85%
B. 33.80%
C. 35.89%

 

3. An investor buys one share of a stock at $85 at t = 0. He buys an additional share for $90 at t = 1. The stock pays a dividend of $5 per share at t = 1 and t = 2. The investor sells both the shares at t = 2 for $100 each. Which of the following is most likely the money weighted rate of return?

A. 11.34%
B. 14.18%
C. 14.94%

 

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