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You have been hired as a pension fund manager for TeleRed Corporation, a small manufacturing firm. The corporation currently has $5 million in the fund and expects to have cash inflows of $2 million a year for the first five years followed by cash outflows of $3 million a year for the next five years. Assume that interest rates are at 8%. a. How much money will be left in the fund at the end of the tenth year? (How would you figure this out/plug it into a financial calculator) b. If you were required to pay perpetuity after the tenth year out of the balance left in the pension fund, how much could you afford to pay?
An investment generates $10,000 per year for 25 years. If an investor can earn 10 percent on other investments, calculate the current value of this investment?
Assume the market portfolio has an expected return of 10% and a volatility of 20 percent, while Microsofts stock has volatility of 30 percent.
Use the present value of an annuity formula Determine which is the better investment.
Calculate the past growth rate earnings. (Hint: this is a 5 year growth period. and Evaluate the next expected dividend per share, D1 [D0=0.4($6.50) =$2.60]. Assume that the past growth rate will continue.
Calculate the company's weighted average cost of capital assuming that its new financing will consist of 40% debt, 10% preferred stock, and 50% retained earnings.
How can cash discounts improve collections? What are ramifications if an organization has too much cash on hand?
Chicago Corporation purchases 1,000 shares of the preferred stock of Denver Corp. for $40 per share. In addition, Chicago pays another 1,000 in commissions.
What is the beta coefficient and how is it used to adjust for different levels of risk?
Assume stock returns can be explained by a two-factor model information for two diversified portfolios. The risk free rate is 4%
Corporation A and B are two identical corporation with equal asset values of $50 million. Corporation A is financed by equity only and has 100,000 shares outstanding.
How will Rensselaer Felt's WACC and cost of equity change if it issues dollar 50 million in new equity and uses the proceeds to retire long term debt?
Question are the total market value of the firms stock and the firms total market value ? What is the firms weighted average cost of capital?
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