13. An investment project costs $1,500,500 and has annual cash flows of $680,200 for 4 years. If the discount rate is 18%, what is the discounted payback period?
14. The relevant discount rate for the following set of cash flows is 14 percent. What is the
profitability index?
15. Joyful Boat Limited currently produces boat sails and is considering expanding its
operations to include awnings for homes and travel trailers. The company owns land
beside its current manufacturing facility that could be used for the expansion. The
company bought this land 5 years ago at a cost of $319,000. At the time of purchase, the
company paid $24,000 to level out the land so it would be suitable for future use. Today,
the land is valued at $295,000. The company currently has some unused equipment that
it currently owns valued at $38,000. This equipment could be used for producing
awnings if $12,000 is spent for equipment modifications. Other equipment costing
$490,000 will also be required. What is the amount of the initial cash flow for this
expansion project?
16. Elegant Limited sells customized handbags. Currently, it sells 18,000 handbags annually
at an average price of $89 each. It is considering adding a lower-priced line of handbags
that sell for $59 each. The firm estimates it can sell 7,000 of the lower-priced handbags
but will sell 3,000 less of the higher-priced handbags by doing so. What is the amount of
the sales that should be used when evaluating the addition of the lower-priced
handbags?
17. Two years ago, you purchased a stock at a price of $32.16. The stock pays quarterly
dividends of $0.20 per share. Today, the stock is selling for $28.20 per share. What is
your capital gain on this investment?
18. One year ago, you purchased 100 shares of stock in Global Trading at a price of $38.70 a
share. The stock pays a quarterly dividend of $0.15 a share. Today, you sold all of your
shares for $40.10 per share. What is the total amount of your dividend income on this
investment?
19. You just sold 600 shares of Tai Tai stock at a price of $31.09 a share. Last year, you paid
$30.92 a share to buy this stock. Over the course of the year, you received dividends
totaling $1.20 per share. What is your total capital gain on this investment?
20. Fast Jet stock is currently selling for $48 a share. The stock has a dividend yield of 2.6
percent. How much dividend income will you receive per year if you purchase 200
shares of this stock?