EAR and Annuities

You are helping your friend plan for her retirement. Your friends company has a new pension plan that will deposit $100 at the end of each month into her retirement fund (the first deposit will be made in one month from today. She plans to retire exactly 25 years from today, and estimates that she will need $3,000 per month withdrawn at the beginning of each month for 20 years. If interest rates are 12 percent per year, compounded quarterly, how much must she deposit into her retirement fund at the end of each month (in equal amounts per month) over the next 25 years, in addition to the$100 deposited by the company, in order to meet her objective?

What is the expected value of this opportunity : A black box has a total of 10 balls sitting inside. One ball is labeled $100. Two balls are labeled $200, and seven balls are labeled $300. Suppose that you are offered the opportunity of picking one ball at random, meaning you choose one ball but yo.. |

About replacing an old computer with a new one : Suppose we are thinking about replacing an old computer with a new one. The old one cost us $1,280,000; the new one will cost, $1,540,000. The new machine will be depreciated straight-line to zero over its five-year life. Calculate the EAC for the ol.. |

Calculating EAR : Friendly’s Quick Loan Inc., offers you “five for four, or I knock on your door.” This means you get $4 today and repay $5 when you get your paycheck in one week (or else), What’s the effective annual return Friendly’s earns on this lending business? .. |

What should current rate be on two-year treasury securities : One year treasury bills currently earn 5.35 percent. You expect that one year from now, one year treasury bill rates will increase to 5.50 percent. The liquidity premium on two-year securities is 170 percent. If the liquidity theory is correct, what .. |

EAR and Annuities-plan for retirement : You are helping your friend plan for her retirement. if interest rates are 12 percent per year, compounded quarterly, how much must she deposit into her retirement fund at the end of each month (in equal amounts per month) over the next 25 years, in .. |

An unlevered firm with assets valued at approximately : Consider Toews, an unlevered firm with assets valued at approximately $1 billion. Toews has a current stock price of $10 per share, and also has a policy of not paying dividends. Next consider Jones, with 500 shares of Toews purchased 2 years ago at .. |

Debt while maintaining its current equity and net income : Quixote Industries currently has $6 million in debt and $10 million in equity. Assume the firm uses some of its cash to decrease its debt while maintaining its current equity and net income. Which one of the following will decrease as a result of thi.. |

What is the operating cash flow : Ridiculousness, Inc., has sales of $40,000, costs of $20,000, depreciation expense of $1,500, and interest expense of $800. If the tax rate is 35 percent, what is the operating cash flow, or OCF? (Do not round intermediate calculations.) |

## Prepaid expenses totaling-liabilitiesAt year’s end your company has cash of $10,500, receivables of $49,900, inventory of $40,200, and prepaid expenses totaling $5,900, Liabilities of $56,500 must be paid next year. A year ago receivables stood at $68,100, and sales for the current year.. |

## What is the third-party-payer system in your organizationWhat is the third-party-payer system in your organization? How does this system impact your organization? |

## Chemical processes-revenues from infiltrator divisionFlowton Products enjoys a steady demand for stainless steel infiltrators used in a number of chemical processes. Revenues from infiltrator division are $50 million a year and production costs are $47.5 million. However, the 10 high-precision Munster .. |

## Compare the ytm and the call rateA bond sells for $1500 and it pays $100 per annum till its maturity 18 years from now. The firm, however, may call it back after 3 years at $1100. Derive its ytm and its call rate. Compare the ytm and the call rate. Are they reasonable? Why, or why n.. |

## Compute the NCF-COC and NPVWe invest $10 million in a furniture factory. The information we have is as follows. The European Union subsidizes the investment up to 60% of the cost and 40% of the interest. After the first ten year period, the NCF and the expenses will grow forev.. |

## Rapid retail comparative statement of incomeRapid Retail Comparative Statement of Income. complete the increase (decrease) in dollars and percent. comment on trends. |

## Calculate the appropriate number of bondDiscuss how derivatives could be used to hedge this risk. Explain and provide examples if possible and calculate the appropriate number of bond and equity futures that should be sold. |

## What is the estimated growth rate for this perpetuityN&H Enterprises is valued at $787.5 million. Last year, it generated $30 million of cash flow. The appropriate discount rate on N&H's cash flow is 9%. What is the estimated growth rate for this perpetuity? |

## PV and loan eligibility-Reaching a financial goalYou have saved $5,000 for a down payment on a new car. The largest monthly payment you can afford is $450. The loan will have a 9% APR based on end-of-month payments. Erika and Kitty, who are twins, just received $35,000 each for their 26th birthdays.. |

## Any signalling effects of dividends should occurAny signalling effects of dividends should occur on the ____________ |

## What is the average daily floatIn a typical month, the Hampton Corporation receives 80 checks totaling $139000. These are delayed four days on average. What is the average daily float? Assume 30 days in a month. |

## Seattle health plans currently uses zero-debt financingSeattle Health Plans currently uses zero-debt financing. Its operating income (EBIT) is $1 million, and it pays taxes at a 40 percent rate. It has $5 million in assets and, because it is all-equity financed, $5 million in equity. Suppose the firm is .. |

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