Invest in? risk-free technology that require upfront payment

Assignment Help Financial Management
Reference no: EM131552377

You can invest in a? risk-free technology that requires an upfront payment of $1.16 million and will provide a perpetual annual cash flow of $118,000. Suppose all interest rates will be either 9.9% or 5.2% in one year and remain there forever. The? risk-neutral probability that interest rates will drop to 5.2% is 85%. The? one-year risk-free interest rate is 8.1 %8.1%?, and? today's rate on a? risk-free perpetual bond is 5.3%. The rate on an equivalent perpetual bond that is repayable at any time? (the callable annuity? rate) is 8.7%. a. What is the NPV of investing? today?

Reference no: EM131552377

Questions Cloud

What is your net profit per share from this position : what is your net profit per share from this position?
What is company cost of common equity : Patterns Corporation has a target capital structure of 35 percent debt and 65 percent common equity, What is the company’s cost of common equity.
What is the company cost of common equity : What is the company’s cost of common equity if all of its equity comes from retained earnings?
Some of the challenges implementing the framework : What are some of the challenges implementing the framework.
Invest in? risk-free technology that require upfront payment : You can invest in a? risk-free technology that requires an upfront payment of $1.16 million and will provide a perpetual annual cash flow of $118,000.
What is the company cost of preferred stock : If the company is to issue preferred stock, what is the company’s cost of preferred stock?
What is the dollar duration of bond : A portfolio manager owns $6 million par value of bond ABC. What is the dollar duration of bond ABC per 100-basis-point change in yield?
What is the difference between creditors and equity analysts : Who should analyze corporate bonds creditors or equity analysts and why? What’s the difference between creditors and equity analysts?
About analyzing the credit of an industry and company : How do you go about analyzing the credit of an industry and company,

Reviews

Write a Review

Financial Management Questions & Answers

  How banks create credit and can thereby lend out more money

This problem illustrates how banks create credit and can thereby lend out more money than has been deposited. Suppose that initially $100 is deposited in a bank. Experience has shown bankers that on average only 8% of the money deposited are withdraw..

  Project has the cash flows

A project has the following cash flows: Year Cash Flow 0 –$ 16,700 1 7,400 2 8,700 3 7,200. What is the NPV at a discount rate of zero percent? What is the NPV at a discount rate of 30 percent?

  What is forward price on a forward contract that matures

The spot price of an investment asset is $43 per unit and the annual risk-free rate for all maturities (with continuous compounding) is 3%. The asset provides an income of $1.26 per unit at the end of the first and second years. Assuming no arbitrage..

  Calculate the amounts for the current year

Calculate the amounts for the current year. Calculate the amount and character of income distributed to each trust beneficiary for the year.

  Bonds outstanding that mature in thirteen years

Maple Industries has 7 percent bonds outstanding that mature in thirteen years. The bonds pay interest semiannually and have a face value of $1,000. Currently, the bonds are selling for $1,021.16. What is the firm’s pre-tax cost of debt?

  Compute the interest paid in the eighth year

Consider a 12-year loan with annual payments at 5%. If the loan amount is $250,000, compute the interest paid in the eighth year.

  What is the standard deviation of portfolio invested

Stock A has an expected return of 11% and a standard deviation of 35%. Stock B has an expected return of 20% and a standard deviation of 55%. The correlation coefficient between Stocks A and B is 0.2. What is the standard deviation of a portfolio inv..

  Discuss which mitigation strategies

Analyze all of the risks and mitigation strategies discussed this week in a brief summary, and discuss which mitigation strategies are not appropriate based on your informed judgment, and offer alternative mitigation strategies.

  Net income is the firm expected to pay out as dividends

what portion of its net income is the firm expected to pay out as dividends? What is the company's expected growth rate?

  About the portfolio return

Portfolio Return At the beginning of the month, you owned $6,300 of Company G, $8,600 of Company S, and $2,200 of Company N. The monthly returns for Company G, Company S, and Company N were 7.85 percent, -1.56 percent, and -.17 percent. What is your ..

  Shorted by weight and type before being shipped off to feed

The Queensland Land and Cattle Company (QL&CC) is one of the largest cattle-buyers in the country. It has buyers at all the major cattle auctions throughout eastern Australia who buy on the company’s behalf and then have cattle shipped to Longreach, ..

  What is the payback period and calculate the future worth

Calculate the Present Worth (PW) at 10% interest.Calculate the Future Worth (FW) at 10% interest. What is the payback period?

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