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Annual opportunity cost

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Reference no: EM133117112

Solve the following: 

  1. What will a deposit of $4,500 at 7% annual interest is worth if left in the bank for nine years? 
  2. Given an annual opportunity cost of 10%, what is the future value of a $1,000 ordinary annuity for 10 years?
  3.  What is the present value of $800 to be received at the end of 8 years, assuming an interest rate of 20 percent, quarterly compounding? 
  4. Your mother is planning to retire this year. Her firm has offered her a lump sum retirement payment of $50,000 or a $6,000 lifetime ordinary annuity-whichever she chooses. Your mother is in reasonably good health and expects to live for at least 15 more years. Which option should she choose, assuming that an 8 percent annual interest rate is appropriate to evaluate the annuity?
  5. Sun Limited issues 10,000, 9 % irredeemable debentures of Rs.100 each at a premium of 10%. The costs of floatation are 2%. The tax rate is 40%. Compute after tax cost of debt capital. 
  6. Your company's share is quoted in the market at Rs.20 currently. The company pays a dividend of Re.1 per share and the investor's market expects a growth rate of 5 per cent per year. (i) Calculate the company's equity cost of capital. (ii) If the anticipated growth rate is 6%, calculate the indicated market price per share. 
  7. Thirty years ago, Jesse Jones bought 10 acres of land for $1,000 per acre in what is now downtown Houston. If this land grew in value at an annual interest rate of 8 percent, what is it worth today? 
  8. Mr.X deposits Rs.5,000 at the end of every year for 5 years and the deposit earns a compound interest @ 8% p.a. Determine how much money he will have at the end of 5 years? 
  9. Your mother is planning to retire this year. Her firm has offered her a lump sum retirement payment of $50,000 or a $6,000 lifetime ordinary annuity-whichever she chooses. Your mother is in reasonably good health and expects to live for at least 15 more years. Which option should she choose, assuming that an 8 percent annual interest rate is appropriate to evaluate the annuity? 

Reference no: EM133117112

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