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Greyhound has opened a new bus route; the initial investment cost of the route was $55,000. It will produce $30,000 (in constant dollars) of revenue annually for 6 years. The real MARR is 8% and there will be 2% inflation annually.
a) Determine the current cash flows for each year taking into account the inflation rate (actual dollar cash flows).
b) Find the PW for the investment (using above actual dollar cash flow values
c) Was the investment worth undertaking? Why?
You currently hold a 7-year fixed rate bond 5% annually. You would like to hedge against changes in the level and the slope of the yield curve and you plan to use a 1-year zero coupon bond and a 7-year zero coupon bond. Use the following table to com..
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A Stock has a required return of 11%, the risk- free is 7%, and the market risk premium is 4%. What is the stock’s beta? If the market risk premium increased to 6%, what would happen to the stock’s required rate of return? What would it be? Assume th..
What is the annualized cost for a garbage truck that initially costs $80,000, will cost $4,100 per year to operate for its 20-year life?
In equipment acquisition proposal, MKBK Enterprises has worked out deal on interest rate with vendor. Determine the monthly payment for the first 30 months.
What are the differences between simple interest and compound interest. With regards to money: What are differences between future value and present value.
Comfy Coach Travel Agencies has a price of $72 per share and the dividends have been: 2010 - $1.25, 2011 - $1.28, 2012 - $1.35, 2013 - $1.42, 2014 - $1.51. What is the company's required rate of return? (show work)
How do commercial banks alleviate the problem of liquidity risk that investors would face if they were to directly loan funds to individuals and corporations? What are the main differences between money markets and capital markets?
Suppose that the volatility of an asset will be 20% from month 0 to month 6, 22% from month 6 to month 12, and 24% from month 12 to month 24. What volatility should be used in Black-Scholes-Merton to value a 2-year option?
Assume that the six-month Treasury spot rate is 1.6% APR, and the one-year rate is 2%, both compounded semiannually. What is the price of a one-year $1000 par Treasury with 2% coupons?
The company operates deep mines as well as strip mines. Most of the coal mined is sold under contract, with excess production sold on the spot market.
Lamar Baily purchased a 7% coupon corporate bond that matured in 10 years and paid interest semiannually. What is this return on an annual basis?
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