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Casper Milktoast has $200,000 available to support consumption in periods 0 (now) and 1 (next year). He wants to comsume exactly the same amount in each period. The interest rate is 8%. There is no risk. Suppose Casper is fiven an opportunity to invest up to $200,000 at 10% risk-free. The interst rate stays at 8%. What should he do, and how much can he consume in each period if he is not allowed to borrow against future income?
Chuck Brown will receive from his investment cash flows of $3,175, $3,460, and $3,830 at the end of years 1, 2 and 3 respectively. If he can earn 7.5 percent on any investment that he makes, what is the future value of his investment cash flows at th..
A company is 38% financed by risk-free debt. The interest rate is 11%, the expected market risk premium is 9%, and the beta of the company’s common stock is 0.61. What is the company cost of capital? What is the after-tax WACC, assuming that the comp..
Prepare a cash-flow budget and a profit budget for Gringotts Ltd on the basis of Strategy 1. The budgets should be split into quarterly intervals showing cash-flow and profit forecasts for each individual quarter.
After the assassination of President John F. Kennedy, an "eternal flame" was placed on his grave. It is a torch that should remain lit forever. What was the estimated present value of the cost of the eternal flame at the time that it was placed on Pr..
Toyota has exposed assets of ¥7 billion and exposed liabilities of ¥5 billion. During the year, the yen appreciates from ¥110/$ to ¥80/$. What is Toyota's net translation exposure at the beginning of the year in yen? In dollars? What is Toyota's tran..
Find the return of an asset with the following information: initial price $32.65 final price $41.22 dividend $2.17? Also what formula do you use to find the return?
Sunburn Sunscreen has a zero coupon bond issue outstanding with a $20,000 face value that matures in one year. The current market value of the firm’s assets is $23,200. The standard deviation of the return on the firm’s assets is 27 percent per year,..
On December 8, 2015, Fortune Magazine posted an article online entitled, “Here Are the Tech Stocks You Should Buy in 2016.” Suppose your friend is considering investing in these 8 companies by purchasing their stocks today. What is a difference betwe..
As Marie and Harry enter into their negotiations, their perceptions of each other will be an important component to the negotiation process. Define perception and the role it plays in the negotiation process. What are the four major perceptual err..
Appliance for Less is a local appliance store. It costs this store $23.93 per unit annually for storage, insurance, etc., to hold microwave in their inventory. Sales this year are anticipated to be 613 units. Each order costs $91. The company is usin..
Your manager just finished computing your firm's weighted average cost of capital. He is relieved because he says that he can now use that cost of capital to evaluate all projects that the firm is considering for the next four years. Evaluate that st..
Given a floater/inverse floater class with $10,000,000 principal and even allotments to the floater and inverse floater class , and a pool of 4% FRMs with annual payments, what is the payment to the floater class if the index rate increases to 9% in ..
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