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You plan to analyze the value of a potential investment by calculating the sum of the present values of its expected cash flows. Which of the following would increase the calculated value of the investment? Select one: a. The discount rate increases. b. The cash flows are in the form of a deferred annuity, and they total to $100,000. You learn that the annuity lasts for 10 years rather than 5 years, hence that each payment is for $10,000 rather than for $20,000. c. The discount rate decreases. d. The riskiness of the investment's cash flows increases. e. The total amount of cash flows remains the same, but more of the cash flows are received in the later years and less are received in the earlier years.
FreddieMac reports that the average rate on a 30-year fixed rate mortgage is 3.92% as of January 2012. This is down from 4.76% in January 2011 and 5.03% in January 2010. If you have a $226,000, 5%, 30-year mortgage, how much interest will you save if..
Which of the following statements is true of amortization?
A stock had returns of 7 percent, –5 percent, 2 percent, and 10 percent over the past 4 years. What is the standard deviation of this stock for the past four years?
Assume that a friend of yours is thinking about buying a new car. Her presently owned car can be sold for $1600 or can provide adequate service for 2 more years at an operating cost of $1500 next year and $1700 the year afterward. Assuming that she w..
What is the opportunity cost of a checking account that requires a $500 minimum balance to avoid service charges? Assume an interest rate of 4%. If you earn a 9% return on your savings and are in the 28% tax bracket, what is your after-tax savings ra..
A productivity index of 110% means that a company’s labor costs would have been 10% higher if it had not made production improvements. Assume that Baldwin had a productivity index of 112% and that Chester had a productivity index of 103%.
In July 2007, News Corp. entered into an agreement to purchase all of the outstanding shares of Dow Jones and Company for $60 per share. Immediately prior to the News Corp. bid, the shares of Dow Jones traded at $33 per share. Estimate the cost of th..
For each of the following cash flows, decide whether there is a unique yield rate i > ?1? Can you guarantee that the yield rate is positive?
Pet Food Company bonds pay an annual coupon rate of 9.66 percent. Coupon payments are paid semiannually. Bonds have 4 years to maturity and par value of $1,000. Compute the value of Pet Food Company bonds if the market interest rate on this type of b..
What will be loss or profit for this proposes service If the airline plans to sell tickets at $600 each?
A five-year project has an initial fixed asset investment of $350,000, an initial NWC investment of $38,000, and an annual OCF of −$37,000. The fixed asset is fully depreciated over the life of the project and has no salvage value. If the required re..
what will josh's bank balance be 5 years after the original deposit was made?
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