How much are you willing to pay for this deal today

Assignment Help Financial Management
Reference no: EM131464306

You have an opportunity to invest in a deal that will make yearly payments forever. These payments will grow at a rate of 3% per year. You will receive your first payment of $3500 one year from today. Due to the risks associated with this investment, you will require a return of 7%. How much are you willing to pay for this deal today? SHOW DETAILED WORK

Reference no: EM131464306

Questions Cloud

Calculate the minimum transfer balance required to justify : Calculate the minimum transfer balance required to justify the use of a wire transfer.
Fair market interest rate for such bonds : Heymann Company bonds have 4 years left to maturity. Would you pay $829 for each bond if you thought that a “fair” market interest rate for such bonds was 12%
What interest rate makes you indifferent between the two : The government of Chad is considering two different public projects. What interest rate makes you indifferent between the two? Explain
What was the account balance on january : What was the account balance on January 1, 2011?
How much are you willing to pay for this deal today : You have an opportunity to invest in a deal that will make yearly payments forever. How much are you willing to pay for this deal today?
What are the points of this mortgage : If only point fee is charged, what are the points of this mortgage?
Compute the payback period and net present value : The large publishing company you work for has built up an excess pile of $200M. Compute the Payback Period, Net Present Value and Internal Rate of Return.
What will be the firms cash cycle : Assuming that all of LilyMac’s sales are on credit, what will be the firm’s cash cycle?
What is bonds yield to maturity : What is the bond's yield to maturity if the bond is selling for $837.75?

Reviews

Write a Review

Financial Management Questions & Answers

  What do you think is the main point of the video clip

Provide the Web link for the video clip.- What do you think is the main point of this video clip?-  How might you change your process of investing as a result of watching this video clip?

  Net cash inflows and outflows into a single payment

Each of the following factors is sometimes a constraint on the free movement of funds internationally. Why would a government impose such a constraint? How might the management of a multinational argue that such a constraint is not in the best intere..

  This will be an annuity of cash flows

What is the present value of $2,525 per year, at a discount rate of 8%, if the first payment is received 6 years from now and the last payment is received 27 years from now? No cash flows will be received for the first 6 years. This will be an annuit..

  What risk adjusted rate of return is appropriate

The risk-free rate is 7 percent and the market risk premium is 7.4 percent.- Super Muench wants to know what risk-adjusted rate of return is appropriate for investments in its retail outlets.

  What is the present value of this investment

Ransport Company has made an investment in another company that will guarantee it a cash flow of $37,250 each year for the next five years. If the company uses a discount rate of 15 percent on its investments, what is the present value of this invest..

  An option investor believes that the stock price

An option investor believes that the stock price of a company will have a big jump in the next 3 months. But he is uncertain about the direction of the jump. Which of following strategies should the investor take to profit from his belief?

  What is weighted average cost of capital

A company has 30 million shares outstanding trading for $8 per share. It also has $90 million in outstanding debt. If its equity cost of capital is 15%, and its debt cost of capital is 9%, and its effective corporate tax rate is 40%, what is its weig..

  Consistently earned higher than normal returns in market

A few well publicized investors have consistently earned higher than normal returns in the market over the last decade (for example, Warren Buffett). What does this imply about the EMH? How would you explain their success?

  Nominal annual yield rate compounded semi annually

A 10 year bond has semi-annual coupons. The coupon rate is 5% for the first 5 years and 9% for the following 5 years. The bond has face amount of 100 and a redemption amount of 105. Six months before the first coupon, the bond is purchased for 100. C..

  What is the required return on the company stock

Burress Inc. is expected to maintain a constant 7.18 percent growth rate in its dividends, indefinitely. If it has a dividend yield of 4.41 percent, what is the required return on the company’s stock?

  Explain the firms position to shareholders

Is there a conflict between maximizing shareholder wealth and never paying bribes when doing business abroad? If so, how might you explain the firm's position to shareholders asking why the company does not pay bribes when its foreign competitors in ..

  Using core deposits versus borrowings for both liquidity

Explain the various advantages and disadvantages of using core deposits versus borrowings for both liquidity needs and as a long-term funding source. What is the relationship between the two?

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd