How long must she live after the day she retired to come out

Assignment Help Finance Basics
Reference no: EM13489202

1.The Tillamook County Creamery Association manufactures Tillamook Cheddar Cheese. It markets this cheese in four varieties: aged 2 months, 9 months, 15 months, and 2 years. At the shop in the dairy, it sells 2 pounds of each variety for the following prices: $7.95, $9.49, $10.95, and $11.95, respectively. Consider the cheese maker’s decision whether to continue to age a particular 2-pound block of cheese. At 2 months, he can either sell the cheese immediately or let it age further. If he sells it now, he will receive $7.95 immediately. If he ages the cheese, he must give up the $7.95 today to receive a higher amount in the future. What is the IRR (expressed in percent per month) of the investment of giving up $79.50 today by choosing to store 20 pounds of cheese that is currently 2 months old and instead selling 10 pounds of this cheese when it has aged 9 months, 6 pounds when it has aged 15 months, and the remaining 4 pounds when it has aged 2 years?

2.Your grandmother bought an annuity from Rock Solid Life Insurance Company for $200,000 when she retired. In exchange for the $200,000, Rock Solid will pay her $25,000 per year until she dies. The interest rate is 5%. How long must she live after the day she retired to come out ahead (that is, to get more in value than what she paid in)?

3.You are thinking of making an investment in a new plant. The plant will generate revenues of $1 million per year for as long as you maintain it. You expect that the maintenance cost will start at $50,000 per year and will increase 5% per year thereafter. Assume that all revenue and maintenance costs occur at the end of the year. You intend to run the plant as long as it continues to make a positive cash flow (as long as the cash generated by the plant exceeds the maintenance costs). The plant can be built and become operational immediately. If the plant costs $10 million to build, and the interest rate is 6% per year, should you invest in the plant?

Reference no: EM13489202

Determine zubin mehta corporations free cash flow

Prepare an income statement for the year 2014 using the multiple-step form. Common shares out-standing for 2014 total 40,550($000 omitted). Prepare an income statement for the

Implementing one of the policies below

Stockholders' equity will be used to finance $15 million of assets, with the remainder financed by short- and long-term debt. The organization is considering implementing on

What is this stock worth to you per share

After that, the company has stated that the annual dividend will be $1.25 per share indefinitely. What is this stock worth to you per share if you demand a 10.8 percent rate

Prepare a simple balance sheet of assets

Assume that Banc One receives a primary deposit of $1 millions. The bank must keep reserves of 20 percent against its deposits. Prepare a simple balance sheet of assets and

Calculate the var for the following situations

Use the analytical method and determine the VAR at a probability of 0.05 for a portfolio in which the standard deviation of annual returns is $2.5 million. Assume an expecte

What is the most he should have to pay for the annuity

The annuity is for $8,000 per year and is designed to last 10 years. If the interest rate for this problem calculation is 13%, what is the most he should have to pay for the

Black-scholes-merton formula

Suppose you hold LLL employee stock options representing options to buy 11,600 shares of LLL stock. LLL accountants estimated the value of these options using the Black-Scho

Calculate the risk ratio of gastroenteritis

Set up the 2x2 table for these data. Calculate the risk ratio of gastroenteritis associated with swimming in the upper deck pool. State in words your interpretation of the abo

Reviews

Write a Review

 
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