Example of theoretical value, Finance Basics

Assignment Help:

Example of Theoretical Value

As a result of the purchase of an asset, the income stream will rise by of £1,000 per annum for 25 years.  By assuming a discount rate of 20 percent, calculate the maximum price to be paid for this asset avoiding taxation.

Solution

Maximum price = Present value of all future cash inflows

Maximum price = £10,000 x PVAF20%, 25

£10,000 x (1- (1.2)-25) / 0.20 = 10,000 x 4.9476

                                                = £49,476

During practice the income streams are never uniform and contain to be estimated from existing income indicted in the current accounts.


Related Discussions:- Example of theoretical value

Maturity on the bond, You buy a SML Bond for $980.  The bond has a face val...

You buy a SML Bond for $980.  The bond has a face value of $1000 and an yearly  coupon rate of 8%.  There are five years left until maturity. a. What is the yield to maturity on

Government budget deficit, Government Budget Deficit If the Government...

Government Budget Deficit If the Government spends much more than it gets in from tax revenue, it runs a budget deficit. This deficit should be covered or financed either via

Finance, This case has been framed in order to test the skills in evaluatin...

This case has been framed in order to test the skills in evaluating a credit request and reaching a correct decision

Differences between an ordinary annuity and an annuity due, 1. Describe the...

1. Describe the similarities and differences in between an ordinary annuity, an annuity due, and perpetuity.  Provide a methodical answer, including examples to demonstrate your po

Micro economics, effect of gdp in the domestic market

effect of gdp in the domestic market

Personal Finance, Which of the following is true with regards to rising int...

Which of the following is true with regards to rising interest rates. A. Use long-term loans to take advantage of current low rates. B. The term of the loan is ot impacted by risin

Objective to transfers of financial assets, Access the relevant authoritati...

Access the relevant authoritative literature on accounting for the transfer of financial assets. What conditions must be met for a transfer of receivables to be accounted for as a

Calculate the expected sale, 1. Suppose company A expects to increase unit ...

1. Suppose company A expects to increase unit sales of i-phone by 15% per year for the next 5 years. If you currently sell 3 million i-phones in one year, how many phones do you ex

Example of asset based valuation, Example of Asset Based Valuation Ext...

Example of Asset Based Valuation Extracted information from the books of Kent Limited.   Current liabilities Bank overdraft    Sh. 300,000

Determine the utility of the entrepreneur, Suppose an entrepreneur owns a f...

Suppose an entrepreneur owns a firm which has two production opportunities. Technology A generates an output (net profit) of 10 in state 1, an output of 20 in state 2, and an outpu

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd