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Suppose that you are 25 years old. You figure that your income will be such that you will be able to save for the next 25 years, until age 50 (first deposit at age 26 and last deposit at age 50). At age 50, your income will just cover your expenses. Finally, you expect to retire at age 60, taking your first retirement income amount at age 61 and your last one at age 80, right before you die. Suppose that you want to guarantee yourself an income of $30,000 per year after retirement. How much should you put away every year, for the next 25 years, starting at the end of this year (at age 26)? Assume that the interest rate is 12%.
Welch Company is considering three independent projects, each of which requires a $5 million investment. The estimated internal rate of return (IRR) and cost of capital for these projects is presented below: If Welch establishes its dividends from th..
The current spot price of gold is $1,020 per ounce. The risk free rate is 3% per year. A gold futures contract has a contract size of 100 oz. Assume that anyone can borrow at the risk-free rate. (10 pts) a. What should the futures price be for a cont..
Suppose that Quincy college offers a risk-free interest rate of 2,5% on both saving and loans and stone hill bank offers a risk-interest of 3% on both saving and loans. what arbitrage opportunity is available?
Which one of the following approaches to a project’s costs of capital entails the use of another firm’s cost of capital rather than the use of your own firm’s cost of capital?
Amongst other things, the management has asked him to work in the stores issuing and accounting for equipment issued to Aggressive's employees. Alan feels that he has not been trained to do this and has given in his notice.
Howard Hane had taken out a $130,000 fire insurance policy for his new restaurant at a rate of $.82 per $100. Nine months later, Howard canceled the policy and decided to move his store to a new location. The cost of the premium to Howard is (use the..
What is the lowest effective annual rate of interest (EAR) you would have to earn on your investment in order to accomplish your goal? Assuming that interest is compounded quarterly, what is the Annual Percentage Rate (APR) that you would need to ear..
The tax basis of property acquired in a like-kind exchange must be allocated between land and improvements: a. in the same ratio as used by the previous owner. b. in a ratio that reflects relative market values of land and improvements at the time of..
Expected Return Circuit City Stores (CC) recently paid a $.33 dividend. The dividend is expected to grow at a 24.70 percent rate. At the current stock price of $9.66, what is the return shareholders are expecting?
Brighton Corp. bought an oil rig exactly 6 years ago for $109,000,000. Brighton depreciates oil rigs straight line over 10 years assuming no salvage value. The rig was just sold to British Petroleum for $34,000,000. What Capital Gain/Loss will Bright..
The Falling Snow Company is considering production of a lighted world globe that the company would price at a mark-up of 0.30 above full cost. Management estimates that the variable cost of the globe will be $68 per unit and fixed costs per year will..
In its most recent financial statements, Newhouse Inc. reported $45 million of net income and $585 million of retained earnings. The previous retained earnings were $556 million. How much in dividends were paid to shareholders during the year? Assume..
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