1. Nuvo Co. is a start up & plans to pay a $.50 dividend in...
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1. Nuvo Co. is a start up & plans to pay a $.50 dividend in 3 years. After that the dividend will increase by 5% each year. If you require a 17% return on this stock, what would you be willing to pay for a share of Nuvo Co. stock today?
2. A corporation is deciding if they should buy a new machine for $185,000. They would depreciate it straight line over 6 years to an expected $5,000 salvage value. Alternatively, the company could lease a similar machine for $36,800 per year. Assume a before tax cost of debt of 8% and a tax rate of 21%. Should they lease or buy? Compute NAL
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