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Much to your surprise, you were selected to appear on the TV show, "The Price is Right." As a result of your prowess in identifying how many rolls of toilet paper an average American family keeps on hand, you win the opportunity to choose one of the following: $2,000 today, $10,000 in 10 years, or $31,000 in 29 years. Assuming you can earn 16% on your money, which should you choose? If you are offered $10,000 in ten years and can earn 16% on your money, what is the present value of $10,000?
In perfect capital markets, how does leverage affect the cost of equity? a. In perfect capital markets, levered equity's cost increases with the debt-equity ratio. b. In perfect capital markets, leverage increases the cost of levered equity by the co..
If you decide to sell she must buy. In return you give her $80,000 in cash and the right to buy the store from you for $X at the end of five years. How can this contract provide you with a 20% annual rate of return on the $80,000?
Kinkead Inc. forecasts that its free cash flow in the coming year, i.e., at t = 1, will be -$10 million, but its FCF at t = 2 will be $20 million. After Year 2, FCF is expected to grow at a constant rate of 4% forever. If the weighted average cost of..
Suppose you have $60,000 to invest. You’re considering Miller-Moore Equine Enterprises (MMEE), which is currently selling for $60 per share. You also notice that a call option with a $60 strike price and six months to maturity is available. MMEE pays..
In addition to the tax shield offered by governments around the world, debt has a lower required rate of return than equity - explain why this is so? Given the inherent tax shield advantages why might we still come across 100% Equity financed firms?
If you are exposed to a 50/50 chance of gaining or losing $1000 and insurance that removes the risk costs $500, at what level of wealth will you be indifferent relative to taking the gamble or paying the insurance?
You will buy a car at $25,600 and a dealer computer the monthly payment to be $508.45 for 60 months of financing. What is the dealer's effective rate of return on the loan?
Suppose the Texas lottery advertises that it pays its winner $10 million. However, this prize money is paid at the rate of $500,000 each year (with the rst payment being immediate) for a total of 20 payments. What is the present value of this prize a..
Assume that interest rate parity holds. In both the spot market and the 90-day forward market, 1 Japanese yen = 0.013 dollar. And 90-day risk-free securities yield 2.4% in Japan. What is the yield on 90-day risk-free securities in the United States?
Dave bought a rental property for $725,000 cash. One year later, he sold it for $750,000. Suppose Dave invested only $105,000 of his own money and borrowed $620,000 interest-free from his rich father. What was his percentage return on investment?
Sorenson Inc. has sales of $5,712,000, a gross profit margin of 27.45 percent, and inventory of $937,000. What are the company’s inventory turnover ratio and days’ sales in inventory?
What is the beta of a portfolio comprised of the following securities? Stock Amount Invested Security Beta
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