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Mr. Art Deco will be paid $100,000 one year hence. This is a nominal flow, which he discounts at an 8% nominal discount rate: PV = 100,000 = $ 92,593 1.08 The inflation rate is 4%. Calculate the PV of Mr. Deco’s payment using the equivalent real cash flow and real discount rate. (You should get exactly the same answer as he did.) (Do not round intermediate calculations. Round your "Real cash flow" and "Present value" answers to the nearest dollar amount and "Real discount rate" answer to 2 decimal places.)
Real cash flow $
Real discount rate %
Present value $
Barnes Corp's total assets at the end of last year were $415,000,000 and its net income after taxes was $17,750,000. What was its return on total assets?
The expected return for the general market is 13 percent, and the risk premium in the market is 9.1 percent. Tasaco, LBM, and Exxos have betas of 0.824, 0.652, and 0.549, respectively. What are the appropriate expected rates of return for the three s..
Rise Against Corporation is comparing two different capital structures: an all-equity plan (Plan I) and a levered plan (Plan II). Under Plan I, the company would have 200,000 shares of stock outstanding. Under Plan II, there would be 150,000 shares o..
An investor bought a racehorse for $1 million. The horse's average winnings were $700,000 per year, and expenses averaged $200,000 per year. The horse was retired after three years, at which time it was sold to a breeder for $175,000. Assume accelera..
You are considering buying a bond issued by General Motors with exactly 5.5 years remaining to maturity that just paid a coupon yesterday. It rained on your paper this morning so you do not know what the coupon rate is. However you are able to see th..
You’re prepared to make monthly payments of $190, beginning at the end of this month, into an account that pays 6 percent interest compounded monthly. How many payments will you have made when your account balance reaches $10,000?
You have a stock mutual fund in which you put $3,000 per year. How much will you accumulate in the account in 25 years if the interest rate is 10%? What if instead you have $4,000 to deposit in the mutual fund earning 10%? If you add $2,000 to that a..
The spot rare for soybeans is 1320 and the 6 month forward price is 1350 the risk free is 4% the lease rate on the 6 month soybean contract is 0.35%. What is the implied annual storage cost if the cost is continuously paid and proportional?
What is the firm's cost of equity estimate according to the DCF method and what is the cost of equity estimate according to the CAPM - What is the firms corporate cost of capital?
Which one of the following is not a benefit of activity-based costing?
Consider a bond with settlement date 12/12/2003. The maturity date of the bond is 11/15/2012. The coupon rate of the bond is 7% and the bond pays coupons semiannually. The bond is selling at a yield to maturity of 8%. Find the duration of the bond. W..
An investment bank pays $32 per share for 3.0 thousand shares of CZS Company in a firm commitment stock offering. It then can sell those shares to the public for $35 per share. What is the listed stock price? What is the profit to the investment bank..
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