Oneida Inc, the world's largest producer of stainless steel and silverplated flatware, reported earnings per share of $0.80 in 1993, and paid dividends per share of $0.48 in that year. The firm was
expected to report earnings growth of 25% in 1994, after which the growth rate was expected to
decline linearly over the following six years to 7% in 1999. The stock was expected to have a beta of
0.85. (The Treasury bond rate is 6.25%, and the risk premium is 5.5%.)

a. Estimate the value of stable growth, using the H model.
b. Estimate the value of extraordinary growth, using the H model.
c. What are the assumptions about dividend payout in the H model?

Your company is starting a new r& d initiative: a development of a new drug that dramatically reduces the addiction to smoking. the expert team estimates the probability of developing the drug succesfully at 60% and a chance of losing the investment of 40%. if the project is successful, your company would earn profits (after deducting the investment) of 9,000 (thousand usd). if the development is unsuccessful, the whole investment will be lost -1,000 (thousand usd). your company's risk preference is given by the expected utility function: u(x) v1000 +x, where x is the monetary outcome of a project. calculate the expected profit of the project . calculate the expected utility of the project . find the certainty equivalent of this r& d initiative . find the risk premium of this r& d initiative e is the company risk-averse, risk-loving or risk-neutral? why do you think so?