1) You are interested in buying RelCo's stock which currently sells for $19/share. You expect net income for 2017 will be $2.10/share and that RelCo will pay a dividend of $.95/share during 2017.

If you believe that RelCo's net income and dividends will grow at 4.5%/year and have estimated its cost of equity to be 9.2%/year, what is your estimate of the stock's true value today?

2) Your company is considering investing $50 million to build a new factory. The new factory is expected to earn after tax profits of $12 million/year for Years 1 and 2 and $13 million/year for Years 3, 4 and 5. If your company's weighted average cost of capital is 7.5%/year, what is the net present value of the new factory?

3) You're a portfolio manager with Fidelity and have been asked to review the risk profile of several mutual funds Fidelity manages. In your opinion:

a. What are the 3 most important areas to analyze to assess risk? and

b. How would you quantify the risk of each mutual fund?