How much should you pay for this perpetuity today

Assignment Help Financial Management
Reference no: EM131962684

A financial advisor is trying to sell you an increasing perpetuity. One year from today you will receive $5,000, and the payments will increase at $5,000 per year. Thus, in 2 years you will receive $10,000, in 3 years you will receive $15,000, and so on. If the interest rate is a 3.9 percent APR compounded quarterly, how much should you pay for this perpetuity today?

Reference no: EM131962684

Questions Cloud

Can heidi make a covered interest arbitrage profit : Copenhagen Covered (A). Heidi Hoi Jensen, a foreign exchange trader at JPMorgan Chase, can invest $5 million, or the foreign currency equivalent of the bank.
Future values as length of time involved increases : What happens to future values as the length of time involved increases? What happens to present values as the length of time involved increases?
Prepare the budgeted multiple-step income statement : Cook Farm Supply Company manufactures and sells a pesticide called Snare. The following data are available for preparing budgets for Snare for the first.
How much would the dividend be per share be : If the cash is used to pay a dividend, how much would the dividend be per share be? And what is the dividend yield? If instead Cooper uses the cash to buy back.
How much should you pay for this perpetuity today : A financial advisor is trying to sell you an increasing perpetuity. how much should you pay for this perpetuity today?
What is the company market share : what is the company's market share? What is market share for Big Shark, and for Best Bikes, in this situation?
What will annual loan payment be : Bath’s Bank offers you a $61,000, eight-year term loan at 9.10 percent annual interest. What will your annual loan payment be?
What are the different payments for different payment plans : Cooley Landscaping needs to borrow $32 ,000 for a new front-end dirt loader. The bank is willing to loan the money at 9% interest for the next 9 years.
What will the annual cash flow be : If you put up $43,000 today in exchange for a 9.7 percent, 10-year annuity, what will the annual cash flow be?

Reviews

Write a Review

Financial Management Questions & Answers

  Find the economic order quantity and annual total cost

find the economic order quantity. the annual total cost (i.e., holding and ordering costs), the optimal number of orders per year.

  Compute the npv statistic for project

Compute the NPV statistic for Project U if the appropriate cost of capital is 11 percent. Should the project be accepted or rejected?

  Coverage for damage to your auto of personal auto policy

According to Part D-Coverage for Damage to Your Auto of a Personal Auto Policy, the insurer's limit of liability for physical damage loss to covered auto is?

  How many shares are outstanding

If the quoted share price for this closed-end fund is $13.26, how many shares are outstanding?

  What was the cash flow to stockholders

Titan Football Manufacturing had the following operating results for 2015: sales = $19,810; cost of goods sold = $13,950; depreciation expense = $2,340; interest expense = $330; dividends paid = $580. Assume no new debt was issued during the year. Wh..

  What is incremental cost of borrowing the additional funds

A borrower can obtain an 80 percent loan at a 4.25% rate with monthly payments amortized over 30 years. Alternatively, he could obtain a 90 percent loan at a 5.75% rate with the same loan term but one point is charged on the 90% loan. the borrower pl..

  Market risk premium is estimated-cost of capital

The common stock of Gulf Corp. has a beta of 0.8. The Treasury bill rate is 4 percent and the market risk premium is estimated at 8 percent. Gulf Corp.'s capital structure is 25 percent debt paying a 5 percent interest rate, and 75 percent equity. wh..

  How should such entities make capital budgeting decisions

Are the capital budgeting criteria applicable to not for profit corporations? How should such entities make capital budgeting decisions?

  Maintain a weighted average cost of capital

Webster's Watering Hole must maintain a weighted average cost of capital of 9% to satisfy covenants in the bond indenture. Analysts forecast the after tax cost of debt of 5% and a cost of equity of 11%. What debt-equity ratio must be employed to meet..

  Calculate the new book value per share

Calculate the new book value per share. Calculate the new market-to-book ratio. Calculate the new stock price.

  What is the amount of the firms net fixed assets

The Whisenhunt Company has a ratio of long-term debt to long-term debt plus equity of .27 and a current ratio of 1.3. Current liabilities are $830, sales are $6,250, profit margin is 8.6 percent, and ROE is 18.8 percent. What is the amount of the fir..

  Depreciated straight-line to zero over five-year tax life

Purple Haze Machine Shop is considering a four-year project to improve its production efficiency. Buying a new machine press for $542551 is estimated to result in $189712 in annual pretax cost savings. The machine is depreciated straight-line to zero..

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd