User Account

All Pages

Indifferent between project a and project b

Assignment Help Finance Basics
Reference no: EM133000467

On 1st January 2020, Peter Green has two investment opportunities, Project A and Project B:

  • Project A is expected to produce cash flows of $1 million every two years with the first cash flow occurring on 1st January 2021. Project A is expected to produce a total of 10 cash flows over its life. The appropriate discount rate is 9% p.a. compounded monthly.
  • Project B is expected to generate a cash flow every six months for ten years with the first cash flow due in six months' time. A discount rate of 9% p.a. compounded monthly also applies to Project B.

Identify the amount of the periodic cash flow from Project B would need to be in order for Mr Green to be indifferent between Project A and Project B. Show all workings to support your answer.

Reference no: EM133000467

Questions Cloud

What rate of return is the franchiser using : Joe Pie is considering investing in a Heaven Pizza franchise that will require an initial outlay of $100,000. He conducted market research and found that after-
What is the total amount of contributed surplus : What is the total amount of contributed surplus to be reported at the statement of financial position at December 31, Year 7
Percent nominal rate of return on bond : You have just purchased a 10-year, 1,000 par value bond. The coupon rate on this bond is 8 percent annually, with interest being paid each 6 months.
Functions of banking regulations : Analyze any FIVE (5) functions of banking regulations.
Indifferent between project a and project b : On 1st January 2020, Peter Green has two investment opportunities, Project A and Project B:
Find the expected return : Costco wants to buy 200 shares of stock at $50 per share because he feels it will rise to $75 within one year. Find the expected return
What is the amount of cash : Peter asks a broker to purchase 500 shares of ABC stock at market.
What is the overall net gain or loss from this hedge : Subsequently the stock market and the futures contract has gone down by 25%. What is the OVERALL net gain or loss from this hedge
Difference between a convertible and callable bond : (a.) Calculate the duration of a 2 year 3.5% coupon paying bond with a face value of £ 1,000. Coupons are being paid semi-annually and the yield to maturity is

Reviews

Write a Review

Finance Basics Questions & Answers

  What were the differences in price

Could you fly on the same airlines and stay at the same hotels in the packages that you could when you searched individually? What were the differences in price? How would you book your trip: Individually or bundled? Why?

  Working and there will be no salvage value

The discount rate you are assuming is 6%. After 5 years the equipment will stop working and there will be no salvage value.

  Concept of focused factory

Discuss how a bank may use the concept of focused factory? What would be some potential benifits of doing so?

  Maintaining the division between gender of athletes in sport

What sociological theories help explain reasons for maintaining the division between gender of athletes in sport?

  What is the apr used for this loan

You obtained a loan of $20,000 to finance your home improvement project. Based on a monthly compounding over 24 months, the end -of-the-month equal payment was figured to be $922.90. What is the APR used for this loan?

  What rate of return is built into the annuity

Suppose you just won the state lottery, and you have a choice between receiving $2,550,000 today or a 20-year annuity of $250,000, with the first payment coming one year from today. What rate of return is built into the annuity? Disregard taxes.

  What is the effective annual rate on your new loan

If you refinance your loan at the government rate, you will amortize the amount you still owe under the original mortgage over 30 years, and your payment will be $750 per month. What is the effective annual rate (EAR) on your new loan?

  Determining the market risk premium

Try to determine the required rate of return on King Farm Corporation's common stock. The firm's beta is 1.82. The rate on a 10-year Treasury bond is 3.63 percent, and the market risk premium is 6.53 percent.

  Long-term place of employment

Imagine that this internship position is your long-term place of employment. How would the organizations policies adjust to accommodate this type of employment?

  What amount must joyce include in gross income for december

Joyce is self-employed. She uses the calendar year and the cash method of accounting. What amount must Joyce include in gross income for December

  Compute bonds yield to call

A newly issued corporate bond has twenty years to maturity. The bond has a coupon rate of 8 percent and pays interest semiannually. Also the bond is callable in six years at a call price equal to 115% of par value.

  Transparent environment of modern business

In the increasingly transparent environment of modern business, personal and corporate integrity and corporate social responsibility are being scrutinized

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!

Submit Assignment

Academics

Major Subjects

Majors

Get In Touch

whatsapp: +1-415-670-9521

Phone: +1-415-670-9521

Email: [email protected]

TERMS & POLICIES

HELP & SUPPORT

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