1. Heinlein Inc is considering investing in a project with a cost of $100k. The project is expected to produce cash flows of $50 in year 1, 85 in year 2, and 250 in year 3. If the discount rate is 0.10 what is the discounted payback period.
2. Using a financial calculator or spreadsheet calculate the following. A) the future value of $ 350 deposit left in an account paying 6 percent annual interest for 10 years. B) The future value at the end of five years of a $ 700 annual end of year deposit into an account paying 8 percent annual interest.
3. Company A has a beta of 0.70, while Company B's beta is 1.45. The required return on the stock market is 9.00%, and the risk-free rate is 2.25%. What is the difference between A's and B's required rates of return? (Hint: First find the market risk premium, then find the required returns on the stocks.) Do not round your intermediate calculations.