Calculates the internal rate of revenue

Assignment Help Financial Management
Reference no: EM131048000

A lottery winner can take $6 million now or be paid $600,000 at the end of the next 16 years. The winner calculates the internal rate of revenue (IRR) of taking the money at the end of each year and estimating that the discount rate across this period will be 4%, decides to take the money at the end of each year. Was her decision correct? Why?

Reference no: EM131048000

Questions Cloud

What price maximizes profits : Your dealings on the secondhand market lead you to believe that there is a 0.4 chance a random buyer will pay $300,000, a 0.25 chance the buyer will pay $350,000, a 0.1 chance the buyer will pay 400,000, and a 0.25 chance it will not sell. If you ..
Cohesiveness and relationships within an organization : Pay is stressed in several of the cases and some of the content in the reading. How much influence do pay differentials between employees at different levels have on commitment, cohesiveness and relationships within an organization?
Define the meaning of industrial robotics : The purpose of this course is to enable me to: learn about a versatile field of Industry Robotics to upgrade my skills in Electro-technology - define the meaning of Industrial Robotics
The corporate structure of mutual insurers : The corporate structure of mutual insurers has changed over time. Briefly describe several trends that have had an impact on the corporate structure of mutual insurers.
Calculates the internal rate of revenue : A lottery winner can take $6 million now or be paid $600,000 at the end of the next 16 years. The winner calculates the internal rate of revenue (IRR) of taking the money at the end of each year and estimating that the discount rate across this perio..
Financial safeguards to protect insureds : A newspaper reporter wrote that "Lloyds of London is an association that provides physical facilities and services to the members for selling insurance. The insurance is underwritten by various syndicates who belong to Lloyd's." Describe Lloyd's o..
Compute the mean median mode and standard deviation : A random sample of 20 cars driving down I-294 is selected and their speed is monitored. Compute the mean, median, mode, and standard deviation, Q1, Q3, Min, and Max for the above sample data on speed per car
Mergers and acquisitions among insurers : A luncheon speaker stated that "the number of life insurers has declined sharply during the past decade because of the increase in company mergers and acquisitions, demutualization of insurers, and formation of mutual holding companies."
Compare a stock insurer to a mutual insurer : Compare a stock insurer to a mutual insurer with respect to each of the following: a. Parties who legally own the company

Reviews

Write a Review

 

Financial Management Questions & Answers

  Which project or projects should the firm accept and why

It requires that all projects have a positive net present value when cash flows are discounted at 10 percent and that all projects have a payback no longer than three years.  Which project  or projects should the firm accept? Why?

  High yield account

Yolanda invests her $5,000 bonus into a high yield account that earns 6.7% simple interest. She wants to buy a Burmese Rabbit Hound with the money. The breeder told her that a puppy would cost $5,500. How long will Yolanda have to wait before she has..

  Underestimation of the level of assets needed may

Underestimation of the level of assets needed may

  What bid price should you submit on the contract

Consider a project to supply 100 million postage stamps per year to the U.S. Postal Service for the next five years. You have an idle parcel of land available that cost $1,900,000 five years ago; if the land were sold today, it would net you $2,100,0..

  What is the extended due date for the return

Mr. and Mrs. Boyd Knevel use a fiscal year ending July 31 as the taxable year for filing their joint Form 1040. a. What is the last date on which the Knevels can apply for an automatic extension of time to file their return for fiscal year ending J..

  Savings account-how much money will you receive

You deposited $1,000 in a savings account that pays 8 percent interest, compounded quarterly, planning to use it to finish your last year in college. Eighteen months later, you decide to go to the Rocky Mountains to become a ski instructor rather tha..

  Calculate expected return and standard deviation

Calculate Expected Return and Standard Deviation (please show how to do this on a calculator using STAT) Based on the following data, calculate the expected return and standard deviation of returns for EACH stock.

  What is the annual interest payment

The Johnson Corporation issues a bond which has a coupon rate of 10.20%, a yield to maturity of 10.55%, a face value of $1,000, and a market price of $850. What is the annual interest payment?

  What is the value of debt in the firm and value of equity

Consider a firm that has assets worth $1,000,000 today. It has a single zero-coupon debt issue with face value $800,000 and a time-to-maturity of five years. What is the risk-neutral probability that the firm will survive to T = 5? What is the value ..

  Call option-position until maturity

Suppose you purchase a call option for $5 and a strike price of $40. On the expiration day, the price of the stock is $55. What is the return on the call option if you hold your position until maturity?

  Assume that the lessee pays no taxes and the lessor

An asset costs $420,000 and will be depreciated in a straight-line manner over its three-year life. It will have no salvage value. The lessor can borrow at 4.4 percent and the lessee can borrow at 7.4 percent. The corporate tax rate is 34 percent for..

  Time line that shows all cash flows for investment

Elena has found a 4 year investment that pays 10% per annum, compounded annually, which allows him to add or withdraw cash at any year end without penalty. She puts $10,000 in today, withdraws $2,000 at the end of Y1 to pay for a vacation, adds $1,00..

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd