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Jeff's parents will like to save for their two year son to go to college. They anticipate that will cost a total of $60,000 for 4 years when Jeff turns 20. They have spoken to their financial advisor and based on past tends have been informed that it will not be unrealistic to expect a 6% return on their investments in the long run. How much they have to invest every year to be able to meet their goal of a college fund for Jeff. Apply the following modifications to the decision problem one at a time and solve for each case. a. Annual college fees are $15000 per year and can be paid every three months b. College annual fees are expected to grow in line with inflation. Long term inflation forecasts are 2% per annum. c. Because of other commitments they are only able to put away $1500 per annum for college funds. How much longer will it take to achieve the goal. d. It turns out that they waited and delayed their decision and now Jeff is 12 . However, they are able to put away 3000 per year instead of the $1000 dollars earlier when he was 2. What will the market return that will ensure that Jeff has the $60,000 he needs to start college.
Sale of Machinery to Subsidiary Corporation as well as Calculation of Income in Acquired Company
Rita Gonzales won the $60 million lottery. She is to get $1 million a year for the next 50 years plus an additional lump sum payment of $10 million after 50 years. The discount rate is 10 percent. What is current value of her winnings?
It would be depreciated under MACRS using a 5-year recovery period. The firm would pay $1,500 per year for a service contract that covers all maintenance costs. There is no salvage value.
The weighted average cost of capital for a firm (assuming all three Modigliani and Miller assumptions apply) is 15 percent. What is the current cost of equity capital for the firm if its cost of debt is 8 percent and the proportion of debt to tota..
Under these conditions, the tax rate will be 30%. If the changes are made, what will be the company's return on equity? Round your answer to two decimal places.
Suppose you are bearish on financial services stocks, due to the currency crisis in Argentina and severe economic problems in Japan. You decide to short Morgan Stanley.
For the year, Movers United has net income of $31,800, net new equity of $7,500, and an addition to retained earnings of $24,200. What is the amount of the dividends paid?
A firm has a cash conversion cycle of 60 days. Annual outlays are $12 million and the cost of negotiated financing is 12 percent. If the firm reduces its average age of inventory by 10 days, what is the annual savings?
Calculate the price of a 4-month European call option on a dividend-paying stock with a strike price of $30 when the current stock price is $34, the risk-free rate is 6% per annum and the volatility is 40% per annum. A dividend of $1.00 is exp..
A project produces cash inflows of $8,300 a year for 4 years. The PI is 1.08 at a discount rate of 12.5 percent. What is the initial cost of the project?
Determine Upton's projected external capital requirement if the increase in sales is expected to be carried out without any expansion of fixed assets.
The firm has no preferred stock outstanding and 100,000 shares of common stock outstanding. Calculate the 2012 earnings per share.
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