## The Clipper Sailboat Company is Expected to Earn

Problem 8-02 eBook Problem 8-02 The Clipper Sailboat Company is expected to earn \$3 per share next year. The company will have a return on equity of 17 percent and the company will grow 4 percent in the future. The company has a cost of equity of 15 percent. Given that information, answer the following questions. a. What is the value of the company’s stock? Do not round Intermediate calculations. Round your answer to the nearest cent. b. What is the present Value of the growth opportunity? Do not round intermediate calculations. Hound your answer to the nearest cent. c. Assume that the growth rate is only 3 percent. What would the appropriate P/E multiple be for this stock? Do not round intermediate calculations. Round your answer to two decimal places.

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## Finance Question: NPV and CAPM Related

Finance Question: NPV and CAPM Related

Suppose that a project is to last 10 years, has an initial investment of \$20,000, and cash flows of \$2,000 per year and a terminal cash flow of \$9,000.

Further, suppose that the project has a beta of 1.2, the risk free rate is 5.5%, and the market premium is 7.0%. Calculate the NPV of this project and identify the decisions rule.

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