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Lenora’s creates exquisite gowns for special occasions on a prepaid basis only. The required return is 12.5 percent. The estimate for one gown order has cash flows of $165,000 in year 0 and -$188,000 in year 1. Which of these statements correctly applies to this order? Please show work to explain the answer
The gown should not be sold for $165,000.
As long as the selling price is $164,819 or higher, the gown should be sold.
The gown must be sold for a minimum price of $167,111 to earn the required return.
The IRR decision rule cannot be applied to this project.
Insufficient information is provided to make a decision based on IRR.
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Suppose a stock had an initial price of $82 per share, paid a dividend of $1.20 per share during the year, and had an ending share price of $90. Compute the percentage total return.
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Milwaukee Surgical Supplies is evaluating the following projects: Project Cost IRR A $100,000 19% B 75,000 17% C 90,000 16% D 80,000 14% If the firm’s corporate cost of capital is 15% and all projects are of average risk, what is the optimal capital ..
Assume today is December 31, 2013. Imagine Works Inc. just paid a dividend of $1.35 per share at the end of 2013. The dividend is expected to grow at 12% per year for 3 years, after which time it is expected to grow at a constant rate of 5% annually...
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