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You will receive $6,800 three years from now. The discount rate is 10 percent.
a. What is the value of your investment two years from now? Multiply $6,800 x .909 ( one year’s discount rate at 10 percent).
b. What is the value of your investment one year from now? Multiply your answer to part a by .909 (one year’s discount rate at 10 percent).
c. What is the value of your investment today? Multiply your answer to part b by .909 (one year’s discount rate at 10 percent).
d. Confirm that your answer to part c is correct by going to Appendix B (present value of a $1) for n = 3 and I = 10% multiply this tabular value by $6,800 and compare your answer to part c. There may be a slight difference due to rounding.
A monopoly is considering selling several units of a homogeneous product as a single package. A typical consumer’s demand for the product is Qd = 120 - 0.25P, and the marginal cost of production is $160. Determine the optimal number of units to put i..
Source Funding Cost of Funding Loan $700,000 8%/year/month Bonds $500,000 6%/year/quarter Common Stock $400,000 $0.75 dividend/year; 5% annual share price growth Retained Earnings $400,000 Great Eats effective tax rate is 34% with taxes paid annually..
An investment will pay $50 at the end of each of the next 3 years, $250 at the end of Year 4, $350 at the end of Year 5, and $600 at the end of Year 6. If other investments of equal risk earn 11% annually, what is its present value? Round your answer..
Ridiculousness, Inc., has sales of $40,000, costs of $20,000, depreciation expense of $1,500, and interest expense of $800. If the tax rate is 35 percent, what is the operating cash flow, or OCF? (Do not round intermediate calculations.)
If two bonds have the same duration, the change in their price when interest rates change will be the same. For non-callable bonds, duration provides only a linear approximation of a bond's price changes as interest rates change.
According to the law of demand, the higher the price of homes, the more likely it is that:
Use the data in the following table to compute the percentage change in EBIT that would occur if sales were to increase by10%.
You would like to buy a used car. You borrow $8,000 from your uncle and agree to repay the loan at the end of three years in a one-time payment of $9,250. What is the interest rate on this loan?
An HMO has a Point of Service (POS) option for its members, but will pay only 80 percent of approved charges. If a member goes out of network for a medical procedure with a charge of $2,000, of which $1,200 is approved, how much must the member pay?
Assume that you have just purchased a 3-year bond that is red empted at par with face value $1,000 and pays coupons semi-annually with annual rate 8%. If the bond is currently trading at a yield of 6%. Compute Its current price. Its current yield to ..
Florida Company (FC) and Minnesota Company (MC) are both service companies. Their stock returns for the past three years were: FC: -5%, 15%, 20%; MC: 8%, 8%, 20%. If FC and MC are combined into a portfolio with 50% of the funds invested in each stock..
A firm's cost of capital:
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