Most valuable prize-the greatest present value

Assignment Help Financial Management

Reference no: EM131176400

You can choose any one of the following prizes. If your discount rate is 10% (annual compounding), which is the most valuable prize, i.e. has the greatest present value?

A. A perpetual stream of annual payments of $1,000 starting in one year.

B. A perpetual stream of annual payments starting at $500 in one year and increasing at 5% per year thereafter.

C. A lump sum payment of $25,000 at the end of 10 years.

D. Five annual payments of $2,800 - the first payment occurs one year from today.

E. A lump sum payment of $10,000 today.

Reference no: EM131176400

Questions Cloud

Unrecorded liabilities : Search for Unrecorded Liabilities. C. Marsh, CPA, is the independent auditor for Compufast Corporation (Compufast), which sells personal computers, peripheral equipment (printers, data storage), and a wide variety of programs for business and games.

What should be the price of symantec stock today : Symantec does not currently pay a dividend, however, in 4 years you expect they will pay their first dividend and it will be $2 per share. The dividend is expected to grow at a rate of 5% and investors’ required rate of return for Symantec stock is 1..

What should you be willing to pay for magnetek stock : Magnetek Corp has just paid a dividend of $2 per share and you are now considering purchasing this stock. Analysts have estimated that Magnetek's dividend will grow at 4% per year in perpetuity. Given the riskiness of Magnetek stock, shareholders' re..

Symantec does not currently pay dividend : Symantec does not currently pay a dividend, however, in 4 years you expect they will pay their first dividend and it will be $2 per share. The dividend is expected to grow at a rate of 4% and investors’ required rate of return for Symantec stock is 8..

Most valuable prize-the greatest present value : You can choose any one of the following prizes. If your discount rate is 10% (annual compounding), which is the most valuable prize, i.e. has the greatest present value?

Boeing has agreed to pay libor-floating rate side of swap : Boeing has entered into a 10 year interest rate swap with Bank America with a notional principal of $500 million. Boeing has agreed to pay LIBOR – the floating rate side of the swap. Bank America has agreed to pay a fixed rate of 7%. Assume that next..

Make the last of your forty investments : You have forty years until you retire. Today you have no investments. At the end of the year, you will make the first of 40 annual investments of $5,000 in an account that returns 6%, how much will you have on the day that you make the last of your f..

What is the rate of return on this stock : The Frisco Company just paid $2.20 as its annual dividend. The dividends have been increasing at a rate of 4% annually and this trend is expected to continue. The stock is currently selling for $63.60 a share. What is the rate of return on this stock..

What is its operating cash flow : During 2012, Raines Umbrella Corp. had sales of $630,000. Cost of goods sold, administrative and selling expenses, and depreciation expenses were $470,000, $95,000, and $140,000, respectively. What is Raines’s net income for 2012? What is its operati..

User Account

All Pages