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You expect to receive $85,000 in net cash payments at the end of each year for the next 7 years. A) Draw timeline of receipts with an opportunity cost of 6.5% B) What is the worth of expected cash flow stream today? C) If today you had to pay $450,000 to get the stream of payments would you and why? D) If your opportunity cost was 10% would you pay $450,000 for the stream of cash flows? why? E) If you pay the $450,000 stream of cash flows what rate do you expect to earn? F) How long to the nearest two digit fraction of time does it take you to get your money back? G) What rate of return do you expect to earn per dollar invested? Show all work please
A zero-coupon bond with a par value of $2,000 matures in 10 years. At what price would this bond provide a yield to maturity that matches the current market rate of 8 percent?
An individual has $110,000 in a retirement account. At the beginning of each year she withdraws $10,000 while earning 10% a year on her money. How much money will be in the account in 20 years? How much will she have in the account after 40 years? Ex..
A share of stock is now selling for $120. It will pay a dividend of $10 per share at the end of the year. Its beta is 1. What do investors expect the stock to sell for at the end of the year? Assume the risk-free rate is 6% and the expected rate of r..
Investors are purchasing 1-year US treasury bills (IOUs from Uncle Sam that will come due in one year) that have a nominal expected rate of return of about 2%. If inflation over the next 12 months is 5% then the real rate of return on that investment..
A mechanical engineer must recommend an A/C system to a commercial building owner. The owner intends to own the building for at least 10 years. A conventional split system has a design life of 10 years, a cost of $54,000, and annual operating costs o..
Trinadad Software is considering a new project whose data are shown below. The equipment that would be used has a 3-year tax life and the allowed depreciation rates, (MACRES) for such a property are 33%, 15%, and 7% for years 1-4. Revenues and other ..
If an asset is sold at a gain, why is the gain subtracted from net income when computing the net cash provided by operating activities under the indirect method?
A firm issued bonds several years ago with a 8% coupon rate. Their bonds are currently trading for $950 in the market. Which of the following most likely has occurred since the time of issue?
The Mini-DV Tape Production Company is facing decreased sales due to the continual trend toward the use of flash storage devices to capture videos. Based on the most recent long-term earnings forecasts, it is anticipated that dividends will decline a..
Sarah Kavenna's luxurious home in Georgetown, a neighbourhood in Washington dc, was recently gutted in a fire. Her living and dining rooms were destroyed completely, and the damaged personal property had a replacement price of $27,000. What is the ma..
You are thinking about buying a share of Glencoe Industries, which has a current market price of $30.00 per share. Glencoe expects to pay a dividend of $1.125 per share next year. Your required rate of return on these types of investments s 6% and is..
The Lory Bookstore used internal financing as a source of long-term financing for 85% of its total needs in 2011. The company borrowed an additional 25% of its total needs in the long-term debt markets in 2011. What were Lory's net new stock issues i..
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