1. You are considering whether to invest in the strategically important project with forecasted cash flows listed below.

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1. You are considering whether to invest in the
strategically important project with forecasted cash flows listed
below. Assume that the discount rate is 15% per annum. Choose one
of five possibilities listed as the correct decision-making
approach to this specific problem:
A. Use NPV rule to make your decision; The IRR rule should not
be used.
B. Use NPV rule to make your decision; The IRR rule can be
used equally well.
C. Use IRR rule to make your decision; The NPV rule will not
be helpful.
D. Neither IRR, nor NPV rules are good decision criteria for
this problem
E. Only Payback Period Rule can be used to make your
decision.
2. Klaus Toys just paid its annual dividend of $1.40. The
required return is 16 percent and the dividend growth rate is 2
percent. Assume constant dividend growth model. What is the value
of this stock five years from now?
A. $11.04
B. $11.26
C. $11.67
D. $12.41
E. $12.58