What is the present value of a perpetual stream of cash flows that pays $70,000 at the end of year one and then grows at a rate of 5% per year indefinitely? The rate of interest used to discount the cash flows is 11%.
Q: Assume you purchased a house on January 1, 2020 for $200,000. You had made a down payment of 20% on…
A: Calculating your monthly payments will allow you to determine if you can afford to finance an item…
Q: Problem 1. Jane McDonald, a financial analyst for Carroll Company, has prepared the following sales…
A: A cash budget is a budget prepared to know the cash receipts, payments, and ending cash balance for…
Q: Haswell Enterprises' bonds have a 10-year maturity, a 6.25% semiannual coupon, and a par value of…
A: Data given: Par value = $1000 N= 10 year Coupon= 6.25% (semiannual) Interest rate =10.5% (semi…
Q: 1. A principal of £100 is invested at a rate of 4% per annum. How much money will there be at the…
A: Future Value refers to the value of the current asset or investment or of cash flows at a specified…
Q: You are managing a portfolio of £20 million. Your target duration is 6 years, and you can choose…
A: The portfolio is referred to as the basket of different financial assets in which investment is made…
Q: PT XYZ is a garment company that produces batik and other traditional clothing. The company's…
A: Weighted average cost of capital shows a company average cost of capital from all the sources that…
Q: Depreciation expense is considered as allowable deduction Select one: True False
A: Depreciation expenditure is the amount depreciated for a specific period (e.g., quarter or year),…
Q: AG company would like to spend RM 700,000 on buying equipment. The cash inflows as in the Table.…
A: The payback period refers to the period within which the initial investment is recovered from the…
Q: st borrowed $267,000 at 2.125%for 15-years.My lender is looking to sell my loan and the market rate…
A: The loans are paid by the monthly regular payments that carry the payment for principal amount and…
Q: You come across two banks offering different compounding interest rates. Public Bank offers 12…
A: Effective Annual Rate: The effective annual rate of interest is the actual or the real rate of…
Q: Assume you have USD $100,000 of cash to buy the following stock at week 1 price. What is the weekly…
A: The stock is the part of the ownership of the company given in return for the capital paid.
Q: Five years ago, $12, 000 was deposited into a savings account that provides an interest of 6.5%…
A: A savings account is a deposit account opened with banks and other financial institutions. The…
Q: 3. Assume that the economy has an annual inflation rate of 5 percent. Are the followinginvestments…
A: Bonds are considered long-term financing options. In order to raise funds, the company issue bonds…
Q: A 10-year bond with coupons at 5% convertible quarterly is redeemed at 1500. If the bond is…
A: Bonds: Bonds are the liabilities of the company which is issued to raise the funds required to…
Q: As a finance manager in a company, you considering purchasing a call option on the stock of Crude…
A: An option is a financial instrument whose value is calculated on the basis of underlying securities.…
Q: What is the payback period for the PHD programme?
A: The payback period is the tenure in which the initial cost can be recovered. It can be calculated in…
Q: If you would like to have $400000 for your retired and you save equal amount monthly in a saving…
A: To calculate the monthly saving we will use the below formula Monthly saving = FV/[(1+r)n-1]/r…
Q: A road requires no upkeep until the end of 3 years when P100,000 will be needed for repairs. After…
A: Given that: i=14% Present value of all cost = 100000×(P/F,14%,3) + 80000×(P/A,14%,6)*(P/F,14%,3) +…
Q: In mid-2009, Rite Aid has CCC-rated, 11-year bonds outstanding with a yield to maturity of 17.3%. At…
A: Bonds are considered to raise long-term funds for the company. They are categorised as non-current…
Q: What is the beta of the portfolio invested 20% in Formula and 80% in Dormula?
A: Capital asset pricing model (CAPM) is a model or method which is used by the company to define the…
Q: Please correct the aswer
A: The current yield of the bond is referred to as the relationship between the annual coupon amount…
Q: Bonds issued by Fresh Farm Company have a par value of $1,000, which is also the amount of principal…
A: Bonds: Bonds are the liabilities of the company which is issued to raise the funds required to…
Q: re developing a new product and you use a 12% discount rate to compute its NPV. Your bank, from whom…
A: Discount rate of the project depends on the many factors that are going to be have impact on the…
Q: Your discount brokerage firm charges $8.20 per stock trade. How much money do you need to buy 220…
A: Brokerage charges = $8.20 Price per share = $29.42 Number of shares = 220 Amount need to buy 220…
Q: Panda Toys Inc. plans to sell one line of its panda toys for $ 20. The material cost per unit is $4…
A: Here, Selling price per unit = $20 Material Cost per unit = $4 Unit Labor cost = $6 Annual overhead…
Q: You always dream to be a millionaire in your entire life and you have only $5,000 to invest now.…
A: Solution:- We know when an amount is invested, it earns interest. The amount initially deposited is…
Q: Mixing Company manufactured 1,098 units of its only product during 2022. The inputs for this…
A: Data given: Manufactured units during 2022 = 1098 units Inputs of Material A (2022) = 610…
Q: he key features of one of the bonds issued by Apple Inc (AAPL)? Discuss how the bond’s terms and…
A: Bonds carry the interest payments each period and maturity will pay the face value of bond and bond…
Q: Sam has a portfolio of three assets. Determine the expected rate of return for the portfolio…
A: Expected Return: The expected return is the minimum required rate of return which an investor…
Q: Smiling Elephant, Inc., has an issue of preferred stock outstanding that pays a $5.30 dividend every…
A: The dividend discount model states that the share price can be calculated by adding up the…
Q: a.Calculate the net present value for each project b.Compare the internal rate of return and net…
A: Capital budgeting is a process used by the companies to use its limited resources to get the best…
Q: Using the information provided in the following table, find the value of each asset. Cash Flow End…
A: Discounting is a technique through which present value (PV) of future cashflows is computed by using…
Q: Ricardo wants to buy a large fishing boat so that he can go deep sea fishing. He needs $100,000 and…
A: Solution:- When some amount is borrowed, it can either be repaid as lump sum payment or in…
Q: What is the firm’s depreciation and amortization expense if its average tax rate is 34 percent
A: Depreciation is the systematic allocation of cost of a tangible asset over its useful life.…
Q: From page 9-3 of the VLN, when determining the issue price of a bond, which interest rate would you…
A: Bonds: Bonds are debt instruments that are used by corporations to raise funds. Since bonds are…
Q: Ultra Petroleum (UPL) has earnings per share of $1.63 and a P/E ratio of 33.08. What’s the stock…
A: Earning per share = $1.63 P/E Ratio = 33.08
Q: Distinguish between internal and external sources of finance for a limited liability company
A: Financing means arranging the funds from different sources to meet the company’s needs and operate…
Q: (Bond valuation) Calculate the value of a bond that matures in 15 years and has a $1,000 par…
A: The value of a bond is determined by calculating the present value of the coupon of the remaining…
Q: Suppose that the interest rate is 7 percent on euro-denominated assets of a one year maturity and 5…
A: First, we will take the spot rate then we will calculate the new exchange rate after taking…
Q: Michelle Passmore is purchasing a $25,000 automobile, which is to be paid for in 60 monthly…
A: A loan is an agreement between two parties where a sum is forwarded in exchange for periodic…
Q: A store will give you a 1.75% discount on the cost of your purchase if you pay cash today.…
A: The concept of the time value of money states that the same amount of money is worth more today than…
Q: (Yield to maturity) Abner Corporation's bonds mature in 22 years and pay 11 percent interest…
A: Yield to maturity: It is the total rate of return earned by a bond once it pay all interest…
Q: A bond's market price is $775. It has a $1,000 par value, will mature in 8 years, and has a…
A: The bond's YTM can be calculated using the RATE Function in excel. RATE = (NPER, PMT, -PV, FV,…
Q: izt Imagine that in a given point in time, t, we observe the following yields: 11 = 2%, 12t = 4%,…
A: Expectation theory helps inunderstanding or predicting the future short term interest rate based on…
Q: Angela Montery has a five-year car loan for a Jeep Wrangler at an annual interest rate of 5.7% and a…
A: Data given: N=5 year Interest rate = 5.7% PMT= $595.50 After 3 years, Angela decides to purchase a…
Q: If the trade executes, how much money do you receive from the buyer? (Round your answer to 2 decimal…
A: Investment refers to those mechanism which is used by the company for the purpose of generating…
Q: Juan invested an amount of $16,000.00 in a mutual fund. After 3 years and 6 months the accumulated…
A: Invested Amount $ 16,000.00 Future Value $…
Q: Would this asset be considered more or less risky than the market? The asset is a. Equally as…
A: An assets risk is represented by stock Beta which indicates that how much movement of stock with…
Q: Problem 2. Euro Designs, Inc., expects sales during 2013 to rise from the 2012 level of $3.5 million…
A: The question is related to Pro Forma Income Statement based on percentage of sales method. The…
Q: Calculate the value of cost of goods sold for Benson's Brewing Company given the following…
A: Ratio is a tool which is used to measure the growth and performance of the firms and analyze the…
What is the present value of a perpetual stream of cash flows that pays
$70,000 at the end of year one and then grows at a rate of
5% per year indefinitely? The rate of interest used to discount the cash flows is
11%.
Question content area bottom
Part 1
The present value of the growing perpetuity is $
enter your response here
. (Round to the nearest cent.)
Step by step
Solved in 2 steps
- (1) What is the value at the end of Year 3 of the following cash flow stream if the quoted interest rate is 10%, compounded semiannually? (2) What is the PV of the same stream? (3) Is the stream an annuity? (4) An important rule is that you should never show a nominal rate on a time line or use it in calculations unless what condition holds? (Hint: Think of annual compounding, when INOM = EFF% = IPER.) What would be wrong with your answers to parts (1) and (2) if you used the nominal rate of 10% rather than the periodic rate, INOM/2 = 10%/2 = 5%?You put $250 in the bank for S years at 12%. A. If interest is added at the end of the year, how much will you have in the bank after one year? Calculate the amount you will have in the bank at the end of year two and continue to calculate all the way to the end of the fifth year. B. Use the future value of $1 table in Appendix B and verity that your answer is correct.What is the present value of a perpetual stream of cash flows that pays $ 7,500 at the end of year one and the annual cash flows grow at a rate of 2% per year indefinitely, if the appropriate discount rate is 9%? What if the appropriate discount rate is 7%? Question content area bottom Part 1 a. If the appropriate discount rate is 9%, the present value of the growing perpetuity is $ enter your response here . (Round to the nearest cent.)
- What is the value now of an annuity that paysf $6,000 at the end of each of the next 92 years assuming an interest rate is 9% per year? Question content area bottom Part 1 The PV is $enter your response here. (Round to the nearest dollar.)What is the present value of $3,000 received a. 10 years from today if the interest rate is 4% per year? b. 20 years from today if the interest rate is 8% per year? Question content area bottom Part 1 a. The present value is $enter your response here. (Round to the nearest cent.) b. The present value is $enter your response here. (Round to the nearest cent.)If you deposit $2 comma 7002,700 today into an account earning an annual rate of return of 1313 percent, what will your account be worth in 4040 years (assuming no further deposits)? In 5050 years? Question content area bottom Part 1 Click on the table icon to view the FVIF table: LOADING... . In 4040 years, your account will be worth $enter your response here. (Round to the nearest cent.)
- If you invest $9,700 per period for the following number of periods, how much would you have received at the end? Use Appendix C. (Round "Factor" to 3 decimal places. Round the final answers to the nearest whole dollar.) a. 11 years at 9 percent Future value $ b. 16 years at 11 percent Future value $ c. 30 periods at 10 percent Future value $How much do you have to deposit today so that beginning 11 years from now you can withdraw $ 15,000 a year for the next 4 years (periods 11 through 14) plus an additional amount of $ 30,000 in the last year (period 14)? Assume an interest rate of 5 percent. Question content area bottom Part 1 The amount of money you have to deposit today is $ enter your response here . (Round to the nearest cent.)Suppose you are given the following cash flow stream. If the interest rate is 20 percent, what is the future value of this cash flow stream at the end of Year 3? Year CF 10 $0 1 $344 2 $314 3 $290 Enter your answer rounded off to two decimal places. Do not enter $ in the answer box.
- At a discount rate of 6.00%, find the present value of a perpetual payment of $ 1,000 per year. If the discount rate were lowered to 3.00%, half the initial rate, what would be the value of the perpetuity? Question content area bottom Part 1 a. If the discount rate were 6.00%, the present value of the perpetuity is $ enter your response here . (Round to the nearest cent.)pls answer and show cash flow diagram I will invest $500 per quarter for my retirement at 7.3% compounding quarterly for 32 years. I have achoice of making that payment of $500 at the beginning or the end of the quarter (regular annuity orannuity due). In which account will I have more money and by how much? Which account will earn themost interest and by how much? Ans: Regular Annuity‐ $249981.20, Interest = $185981.20; Annuity Due‐ $254543.36, Interest =$190543.36Suppose the interest rate is 6.9 APR with monthly compounding. What is the present value of an annuity that pays $110 every three months for five years? (Note: Be careful not to round any intermediate steps less than six decimal places.) Question content area bottom Part 1 The present value of the annuity is $ enter your response here. (Round to the nearest cent.)