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Suppose that you have a choice to receive a lottery payout in two different payment streams:
a. 20 payments of $5,000 at the end of each 6 months.
b. 20 payments of $5,000 at the beginning of each 6 months.
Interest rate is 3% per year. Which choice would you prefer?
1) choice b since it produces a higher PV
2) choice a because it gives you a higher FV
3) choice a because it produces a higher return
4) both choices are valued the same since the interest rate is the same.
Digital Organics (DO) has the opportunity to invest $1.03 million now (t = 0) and expects after-tax returns of $630,000 in t = 1 and $730,000 in t = 2. The project will last for two years only. The appropriate cost of capital is 11% with all-equity f..
Assume that you are presently 30 years old and that you intend to retire when you turn 65. You would like to make sure that you have enough funds at the point of retirement to last until you are 95. You estimate that it would take $72,000 per year, i..
Kyle Corporation is comparing two different capital structures, an all-equity plan (Plan I) and a levered plan (Plan II). Under Plan I, Kyle would have 705,000 shares of stock outstanding. Under Plan II, there would be 455,000 shares of stock outstan..
Prepare an amortization schedule for a three-year loan of $70,000. The interest rate is 8% per year, and the loan calls for equal annual payments. How much interest is paid in the third year? How much total interest is paid over the life of the loan?
Dexter Mills issued 25-year bonds two year ago at a coupon rate of 10 percent. The bonds make semi annual payments. The nominal annual yield-to-maturity on these bonds is 9 percent. What is the current bond price?
Determine External Funding Requirement for 2016?
Financial ratios are essential to assessing to provide an accurate valuation of a firm. Select a publicly-traded firm of your choice. Select one ratio each in the areas of 1) performance, 2) activity, 3) financing, and 4) liquidity warnings. Provide ..
An asset used in a four-year project falls in the 5 year MACRS class for tax purposes. The asset has an acquisition cost of $6,500,000 and will be sold for $1,600,000 at the end of the project. If the tax rate is 35% what is the after tax salvage val..
Dividends have been on the headline of business news all the time. Technology companies typically pay low or no dividends since they reinvest cash flows in research and development to fund future growth. Why is the government considering a tax cut on..
Economics has a notoriously bad reputation among students. They assume it will be dry, boring, and not relevant to their lives. They also think it's hard because the course content must be understood rather than memorized. Why do you think economics ..
Harris Company must set its investment and dividend policies for the coming year. It has three independent projects from which to choose, each of which requires a $3 million investment. These projects have different levels of risk, and therefore diff..
In the Statement of Cash Flows, a source of cash would be: A decrease in assets or an increase in liabilities An increase in assets or a decrease in liabilities Increase in Inventories Decline in notes payable
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