Calculate the present value of the perpetuities

Assignment Help Financial Management

Reference no: EM131300132

Calculate the present value of the following “Perpetuities”. Assume r=20%.

• A “Perpetuity” that only pays you in even years and the payment each year is $100. That is, the you get $100 on year 2, year 4 … and $0 on year 1, year 3… . (Hint: Change the payment period and use a new periodic rate)

• A “Perpetuity” that pays you $300 when the number of year is odd and $400 when the number of year is even. That is $300 on year 1, year 3 … and $400 on year 2, year 4… .

Reference no: EM131300132

Questions Cloud

Find the values assuming a regular or ordinary-annuity : Find the following values assuming a regular, or ordinary, annuity:assuming: A regular or ordinary annuity. An annuity due

How large must the endowment? be and the endownment will be : You have decided to endow your favorite university with a scholarship. It is expected to cost $ 7,000 per year to attend the university into perpetuity. How much must you deposit at the end of each of the next 10 years to accumulate the required? amo..

What is the total number of shares after second round : SKI Co.’s founders have 1.2 million in shares. They need financing in the amount of $700,000. VC1’s required IRR is 40% for first 2 years and 30% for last two years. The VC believes that exit will happen in 4 years at $5M. What is ownership of founde..

Find the market value of shares when dividends : Lawrence Industries' most recent annual dividend was $2.09 per share, and the firm's required return is 16%. Find the market value of Lawrence's shares when dividends are expected to grow at 20% annually for 3 years, followed by a 4% constant annual ..

Calculate the present value of the perpetuities : Calculate the present value of the following “Perpetuities”. Assume r=20%. A “Perpetuity” that only pays you in even years and the payment each year is $100. That is, the you get $100 on year 2, year 4 … and $0 on year 1, year 3… .

What is her net gain or loss on this investment : Assume your cousin purchased five WXO 23 call option contracts at a quoted price of $.34. What is her net gain or loss on this investment if the price of WXO is $28 on the option expiration date?

Transactions costs-are these prices reasonable : Suppose you look in the newspaper and see ABC trading at $60 per share. Calls on ABC with one month to expiration and an exercise price of $55 are trading at $6.50 each. Puts on ABC with one month to expiration and an exercise price of $65 are tradin..

What is the annual value of the depreciation tax shield : Corner Market is considering adding a new product line that is expected to increase annual sales by $418,000 and cash expenses by $337,000. The initial investment will require $237,000 in fixed assets that will be depreciated using the straight-line ..

Principal breadown of each of the three loan payments : Joan Messineo borrowed $ 20,000 at 14% annual rate of interest to be repaid over 3 years. The loan is amortized into three? equal, annual,? end-of-year payments. Calculate the? annual, end-of-year loan payment. Prepare a loan amortization schedule sh..

User Account

All Pages