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1. Your brother has asked you to help him with choosing an investment. He has $6,000 to invest today for a period of two years. You identify a bank CD that pays an interest rate of 0.0300 annually with the interest being paid quarterly. What will be the value of the investment in two years?
2. You are evaluating a growing perpetuity product from a large financial services firm. The product promises an initial payment of $21,000 at the end of this year and subsequent payments that will thereafter grow at a rate of 0.05 annually. If you use a discount rate of 0.09 for investment products, what is the present value of this growing perpetuity?
3. Chuck Brown will receive from his investment cash flows of $3,175, $3,490, and $3,830 at the end of years 1, 2 and 3 respectively. If he can earn 7.5 percent on any investment that he makes, what is the future value of his investment cash flows at the end of three years? (Round to the nearest dollar.)
Calculate the market price for the bonds and long-run earnings growth rate.
Hassle-Free Web is bidding to provide web hosting services for hotel Lisbon. Hotel Lisbon pays its current provider $10,200 per year fo hosing its web page, handling transactions. Hassle-Free figures that it will need to purchase equipment worth $14,..
A company purchases equipment for $5 million, incurs shipping costs of $30, 000 and installation costs of $50,000. It also requires additional net working capital of $100,000. What is the depreciable base?
Suppose you have a short position in a 30-year 6%-coupon bond and a long position in a zero- coupon bond with exactly the same market value and duration. If all zero rates fall by 20 basis points, will your net position rise or fall in value? Explain..
A company believes it can sell 5,100,000 of its proposed new optical mouse at a price of $11.00 each. There will be $8,000,000 in fixed costs associated with the mouse. If the company desires to make a profit $2,000,000 on the mouse, what is the targ..
Explain what the information needs of various stakeholders are for their respective decision making needs.
Production of the implants will require $1,800,000 in net working capital to start and addition net working capital investments each year equal to 15 percent of the projected states sales increase for the following year. Total fixed costs are $2,500...
Company A has sales of 4,481,550; income tax of 531,834; the selling, general, and admin expenses of 267,714; depreciation of 380,725; costs of goods sold of 2,496,660; and interest expense of 178,814. Calculate the amount of the firm's after-tax cas..
You are constructing a portfolio of two assets, Asset A and Asset B. The expected returns of the assets are 11 percent and 15 percent, respectively. The standard deviations of the assets are 23 percent and 31 percent, respectively. The correlation be..
incremental cash flowsnbsp1. it is 1995 and food for less ffl a grocery store is considering offering one hour photo
A company is using the Profitability Index (PI) when evaluating projects. You have to find the PI for the company's project, assuming the company's cost of capital is 9.5%. The initial outlay for the project is $379,000. The project will produce the ..
(Weighted average cost of capital) As a consultant to GBH Skiwear, you have been asked to compute the appropriate discount rate to use in the evaluation of the purchase of a new warehouse facility. You have determined the market value of the firm’s c..
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