Eave him as well off financially as with the annuity

Assignment Help Financial Management
Reference no: EM131087649

Sam was injured in an accident, and the insurance company has offered him the choice of either a lump sum or $50,000 per year for 15 years, with the first payment being made today. If Sam can cam a return of 6.5% per year, how large must the lump sum be to leave him as well off financially as with the annuity?

Reference no: EM131087649

Questions Cloud

Strategic leaders can deal with unhealthy corporate cultures : Describe how strategic leaders can deal with unhealthy corporate cultures. Give an example and briefly describe how leaders implemented some of your suggestions.
What is the total amount of interest paid by the company : South bay catering purchases three new vans, at a total cost of $57000. The company pays $23000 up front and agrees to amortize the remaining 6 years, making regular monthly payments at an annual interest rate of 6.6%. (The first payment will be one ..
Sales are expected to increase : Broussard Skateboard's sales are expected to increase by 15% from $8.4 million in 2013 to $9.66 million in 2014. Its assets totaled $5 million at the end of 2013. Broussard is already at full capacity, so its assets must grow at the same rate as proj..
What is self-supporting growth rate-how large sales increase : Maggie's Muffins, Inc., generated $4,000,000 in sales during 2013, and its year-end total assets were $3,000,000. Also, at year-end 2013, current liabilities were $1,000,000, consisting of $300,000 of notes payable, $500,000 of accounts payable, and ..
Eave him as well off financially as with the annuity : Sam was injured in an accident, and the insurance company has offered him the choice of either a lump sum or $50,000 per year for 15 years, with the first payment being made today. If Sam can cam a return of 6.5% per year, how large must the lump sum..
Call option if it can be exercised prior to maturity : A call option on IBM has an exercise price of 100, the share price S is 120. The option will exprie in 6 months, and the riskfree rate is 10% p.a. and the historical variance of the returns of IBM is 12% p.a.   Before the option expires, IBM is expec..
Concerned about the market outlook : You are concerned about the market outlook and want to hedge your exposure in the stock market. Two strategies are available. One is to write call options on your portfolio. The other is to use portfolio insurance and pay for the cost by writing call..
Creation of secondary market instruments : Mortgage markets have developed significantly since the early 1970s through the creation of secondary market instruments in the form of mortgage pass-throughs, collateralized mortgage obligations (CMOs), and REMICs. What does this call option depend ..
Consider an asset market with no interest payments : Consider an asset market with no interest payments. Suppose that the experiment lasts for 10 periods, with dividends that are either $1 or $5, each with 50 percent probability, and with a final redemption value that equals the sum of the dividends re..

Reviews

Write a Review

 

Financial Management Questions & Answers

  Identify the inflation rate of your home country

Identify the inflation rate of your home country and some well-known foreign country. Then identify the percentage change of your home currency with respect to that foreign country. Did the currency change in the direction and by the magnitude that y..

  Charges customers for their wind generated electricity

Viento Windmills is a utility that charges customers for their wind generated electricity. With their current technology, they earn a total of $65 million each year to pay out to their 3 million shareholders.

  What is the NPV of each project at the crossover rate

Seether, Inc., has the following two mutually exclusive projects available. Year Project R Project S 0 –$ 81,500 –$ 101,200 1 28,600 25,300 2 27,600 25,300 3 25,600 40,300 4 19,600 35,300 5 10,700 14,300. What is the crossover rate for these two proj..

  Retirement strategy-expected return on the stock fund

Your retirement strategy is to invest 500 per month in an equity mutual fund and 200 per month in a bond fund. Your retirement date is 30 years from now. The expected return on the stock fund is expected to be 8% and the expected return on the bond f..

  Shareholders are different from interest payments to lenders

Dividend payments to shareholders are different from interest payments to lenders because: a. Dividend payments are more costly to a corporation b. The interest rate is lower than the cost of equity to corporations c. Interest payments, not dividends..

  Benefit of the interest tax shield next year

With its current leverage, Impi Corporation will have net income next year of $4.5 million. If Impi's corporate tax rate is 35%, and it pays 8% interest on its debt, how much debt can Impi issue this year and still receive the benefit of the interest..

  What is the present value of the cash flows

The state lottery's million-dollar payout provides for $1.3 million to be paid in 20 installments of $65,000 per payment. The first $65,000 payment is made immediately, and the 19 remaining $65,000 payments occur at the end of each of the next 19 yea..

  What price would bond investors be willing to pay

Nedo Enterprises originally sold bonds in 2011 with a 10 year maturity, $1000 par, 6% coupon paying annual interest. It is now 2015 and 4 years later. Bonds of similar risk selling at par know have a 5% coupon rate. What price would bond investors be..

  Debt is trading with a yield to maturity

Find the WACC for a firm with the following characteristics. A few years ago the firm issued $4,000,000 debt with a coupon rate of 4%; currently that debt is trading with a yield to maturity of 5.5% and a value of $3,500,000. The firm has 1,000,000 c..

  What is the NPV of the project in worst-case scenario

We are evaluating a project that costs $119453, has a seven-year life, and has no salvage value. Assume that depreciation is straight-line to zero over the life of the project. Sales are projected at 4219 units per year. Suppose the projections given..

  Classified as foreign source for tax purposes

USco, a domestic corporation, produces industrial engines at its United States plant for sale in the United States and Canada. USco also has a plant in Canada that performs the final stages of production with respect to the engines sold in Canada. Ho..

  Prepared under generally accepted accounting principles

Sam's Motels' operations provided a negative net cash flow last year, yet the cash shown on its balance sheet increased. Which of the following statements could explain the increase in cash, assuming the company's financial statements were prepared u..

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