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Calculate the following:
a. Calculate the annual cash flows from a $2.5 million, 20-year fixed-payment annuity earning a guaranteed return of 7 percent per year if payments are to begin at the end of the current year.
b. Calculate the annual cash flows from a $2.5 million, 20-year fixed-payment annuity earning a guaranteed return of 7 percent per year if payments are to begin at the end of year 6.
c. What is the amount of the annuity purchase required if you wish to receive a fixed payment of $240,000 for 20 years? Assume that the annuity will earn 7 percent per year.
Pappy’s Potato has come up with a new product, the Potato Pet (they are freeze-dried to last longer). Pappy’s paid $127,000 for a marketing survey to determine the viability of the product. Calculate the Time 0 cash flow for this project.
The company follows a constant payout ratio dividend policy. If Headline generates $1.25 millon in income this year, how much will be paid in dividends?
If you are earning a salary of $40,000 in 2016 and expect to receive 4% raises per annum on January 1, what do you anticipate your salary will be in 2025? You hope to buy your dream car 5 years from now. Today, that car costs $88,000 but you expect t..
To complete your last year in business school and then go through law school, you will need $35,000 per year for 4 years, starting next year (that is, you will need to withdraw the first $35,000 one year from today). How large must the deposit be? Ho..
A call option is currently selling for $4.60. It has a strike price of $60 and four months to maturity. A put option with the same strike price sells for $8.30. The risk-free rate is 6 percent, and the stock will pay a dividend of $2.10 in three mont..
Genesco is considering two alternative 5-year leases. what lease payment amount on the second lease would the company be indifferent between these two options?
Your boss has asked for your help in analyzing a company, Dragon, Inc., and you determine the following: Dragon has $50 million in debt paying 10% annually, while the equity is valued at $100 million. The WACC for the company is 12 %. If the corporat..
Momsen Corp. is experiencing rapid growth. Dividends are expected to grow at 25 percent per year during the next three years, 15 percent over the following year, and then 8 percent per year indefinitely. The required return on this stock is 14 percen..
What is the present value of the interest tax shield today and What is Arnells annual interest tax shield?
Wizard Electronics Company's actual sales and purchases for April and May are shown here along with forecasted sales and purchases for June through September. The maximum desired cash balance is $50,000. Excess cash (above $50,000) is used to buy mar..
The Johnson Company has been very successful in the past five years. Over these years, it paid common stock dividend of $ 3 in the first year, $3.20 in the second year, $4.2 in the third year, $4.5 in the fourth year and its most recent dividend was ..
Assume you are a trader with Deutsche Bank. From the quote screen on your computer terminal, you notice that Dresdner Bank is quoting €0.7627/$1.00 and Credit Suisse is offering SF1.1806/$1.00. You learn that UBS is making a direct market between the..
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