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You plan to analyze the value of a potential investment by calculating the sum of the present values of its expected cash flows. Which of the following would increase the calculated value of the investment? Select one: a. The discount rate increases. b. The cash flows are in the form of a deferred annuity, and they total to $100,000. You learn that the annuity lasts for 10 years rather than 5 years, hence that each payment is for $10,000 rather than for $20,000. c. The discount rate decreases. d. The riskiness of the investment's cash flows increases. e. The total amount of cash flows remains the same, but more of the cash flows are received in the later years and less are received in the earlier years.
A new highway is to be constructed. Design A calls for a concrete pavement costing $90 per foot with a 20-year life; two paved ditches costing $3 per foot each; and three box culverts every mile, each costing $9,000 and having a 20-year life. Compare..
Two confidential reports were found available to the public press after controls over confidentiality were found to be working as planned with compensating controls. These events revealed information that would not result in a significant loss to the..
Suppose you and most other investors expect the inflation rate to be 8% next year, to fall to 4% during the following year, and then to remain at a rate of 3% thereafter. Furthermore, maturity risk premiums increase 0.2 percentage points for each yea..
Peter is a salesman for Kroner industries which specializes in making of natural gas furnaces. Use net annual cost to determine the best alternative.
It is very difficult for investors to remove their exposure to unsystematic risk. It is very easy for investors to remove their exposure to systematic risk. Stock A's stock has a beta of 1.30, and its required return is 12.00%. Stock B's beta is 0.80..
Suppose in the market, the rate of return of the risk free asset is 10%. The tangency portfolio has an expected rate of return of 20% and a standard deviation of 20%. In a mean-standard deviation graph, show all possible portfolios of risky asset, th..
Walton tentatively discussed the project with several senior physicians to see what would be required.
What is the current value of a share of Simtek stock to an investor who requires a 15 percent return on his or her investment?
Assume that a $1,000,000 par value, semi annual coupon U.S. Treasury note with five years to maturity (YTM) has a coupon rate of 5%. The yield to maturity of the bond is 7.70%. Using this information and ignoring the other costs involved, calculate t..
Sigma Company has the following capital structure: 45% debt, 15% preferred stock and 40% common stock. Determine the weighted average costs of capital given the following information. Ignore floatation costs. Assume a tax rate of 35%.
Explain why the currency of Country A, whose interest rates are twice as great as those in Country B, must trade at a forward discount. If there were no differences between the spot and forward exchange rates in this interest rate environment, what a..
Discuss the extent of the United Nation’s success in achieving its goals. Suggest ways to improve its effectiveness.
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