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Question: Assume that you just won the state lottery. Your prize can be taken either in the form of $40,000 at the end of each of the next twinty-five years (i.e., $1 million over twenty-five years) or as a lump sum of $500,000 paid immediately.
a. If you expect to be able to earn 5% annually on your investments over the next twently-five years, which alternative should you take? Why?
b. Would your decision in part (a) be altered if you could earn 7% rather than 5% on your investments over the next twenty-five years? Why?
c. At approximately what interest rate would you be indifferent when choosing between the two plans?
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Determine two to three (2-3) methods of using stocks and options to create a risk-free hedge portfolio can be created.
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How much will you have in the next period to consume under two-period perfect certainty model?
Carter Air Lines is now in the terminal year of a project. The equipment originally cost $20 million, of which 80 percent has been depreciated. Carter can sell the used equipment today to another airline for $5 million, and its tax rate is 40 percent..
What is Acetate's debt-equity ratio? (Do not round intermediate calculations and round your final answer to 2 decimal places (e.g., 32.16).
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