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A. A friend who owns a perpetuity that promises to pay $10,500 at the end of each year, forever, comes to you and offers to sell you all of the payments to be recieved after the 20th year for a price of $10,500. At an interest rate of 10 percent, should you pay the $10,500 today to receive payment numbers 21 and onwards? What does this suggest to you about the value of perpetual payments?
B. Now answer part (A) assuming that the annuity will end with your friend's life, he is currently 45 years old. Show your calculations.
If a company is going to finance a project entirely with retained earnings, what would be the cost of that capital? Why?
Suppose that the United State places a strict quota on goods imported from Chile and that Chile does not retaliate. Holding other factors steady, this event should immediately cause the United State
Assume you are willing to pay $30 today for a share of stock which you will expect to sell at the end of year one for $32. If you require and annual rate of return of 12 percent
If the correlation between D and E are o.5 and D has a standard deviation of 0.4 and E has a standard deviation of 0.6, determine combined portfolio standard deviation if you put 40% in D?
The Design Team just decided to save $1,500 a month for next five years as a safety net for recessionary periods. What would today's deposit amount have to be if the firm opted for one lump sum deposit today that would yield same amount of savings ..
The stock chosen is Johnson Controls INC. The computations should be done in excel. Please answer the following questions.
Suppose you are committed to owning a $190,000 Ferrari. If you believe your mutual fund can achieve a 12 percent annual rate of return and you want to buy the car in 9 years on the day you turn 30, how much must you invest today?
Which of the following investments has a larger future value: Investment A an $1,000 investment earning 5% per year for 6 years? Or Investment B a %500 investment earning 10% per year for 6 years with a bonus of an extra $500 added at the end of t..
Objective type questions on decision on investments, inventory and risk management and Common stockholders are most concerned with
Managers should learn how to use statistical techniques to time, and forecast, as accurately as possible, changes in basic micro and macroeconomic factors.
Prepare and Income statement for Cathy Chen, CPA for the year ended December 31, 2015.
Company A currently purchase CDs from many Vendors at various rates per pack. They do not have guaranteed orders with any vendors, and are planning to make consolidated order and reduce overall price.
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