Present value of your windfall if appropriate discount rate

Assignment Help Financial Management
Reference no: EM131022476

You have just received notification that you have won the $2.11 million first prize in the Centennial Lottery. However, the prize will be awarded on your 100th birthday (assuming you’re around to collect), 69 years from now.

Required: What is the present value of your windfall if the appropriate discount rate is 9 percent? Please show all work and round four decimal places.

Reference no: EM131022476

Questions Cloud

What is the present value of the savings : You are thinking of building a new machine that will save your company $1,000 in the rst year. The machine will then begin to wear out so that the savings decline at a rate of 2% per year forever. What is the present value of the savings if the inter..
Retirement account-previous one to compensate for in ation : You want to deposit $X in your retirement account today. You plan to retire in 35 years and make your rst withdrawal from your account (at time 35) of $100,000; you will make 19 additional annual withdrawals (your last one is at time 54) but each one..
How much money will you have in eight years : You are schedule to receive $10,000 in two years. When you receive it, you will immediately invest it for six more years in a savings account that earns 5% annually. How much money will you have in eight years?
Recall the mechanism behind continuous compounding : Recall the mechanism behind continuous compounding: the whole period is divided into increasing numbers of smaller and smaller sub-periods, and the resulting effective rate is calculated as a limit of the effective rates under increasing number of su..
Present value of your windfall if appropriate discount rate : You have just received notification that you have won the $2.11 million first prize in the Centennial Lottery. However, the prize will be awarded on your 100th birthday (assuming you’re around to collect), 69 years from now. What is the present value..
The YTM on a bond is the interest rate : The YTM on a bond is the interest rate you earn on your investment if interest rates don’t change. If you actually sell the bond before it matures, your realized return is known as the holding period yield (HPY). Two years from now, the YTM on your b..
Considering operating a lock-box system : Anne Teak, the financial manager of a furniture manufacturer, is considering operating a lock-box system. She forecasts that 500 payments a day will be made to lock boxes with an average payment size of $2,500. If the lock box makes the cash availabl..
How many years do these bonds have left until they mature : Shinoda Corp. has 8 percent coupon bonds making annual payments with a YTM of 7.4 percent. The current yield on these bonds is 7.75 percent. How many years do these bonds have left until they mature?
About the percentage change in price of bond : Bond J has a coupon rate of 7 percent and Bond K has a coupon rate of 13 percent. Both bonds have 20 years to maturity, make semiannual payments, and have a YTM of 10 percent. If interest rates suddenly rise by 2 percent, what is the percentage price..

Reviews

Write a Review

Financial Management Questions & Answers

  Expected return on the market

Security I has a beta of 1.3, the risk-free rate is 4%, and the expected return on the market is 11%. What is the expected return for Security I?

  Operations and profitability in each country

Among other topics, a discussion of the different countries' currencies, trade policies and cultural variables that may affect operations and profitability in each country.

  What is the initial cash flow of butterfly spread strategy

Suppose you are creating a butterfly spread using call options with 3 different strike prices. Currently, the call price with strike price of $40 is $20.63, the call with strike price of $50 is $11.15, and the call with strike price of $60 is $6.16. ..

  What is the average amount of receivables

McDowell Industries sells on terms of 3/10, net 40. Total sales for the year are $1,633,000; 40% of the customers pay on the 10th day and take discounts, while the other 60% pay, on average, 68 days after their purchases. What is the average amount o..

  What is the beta of your portfolio

You own 400 shares of Stock A at a price of $70 per share, 450 shares of Stock B at $85 per share, and 850 shares of Stock C at $31 per share. The betas for the stocks are 0.8, 1.6, and 0.6, respectively. What is the beta of your portfolio?

  Semi-annual coupon-conversion ratio-holding period return

A convertible bond has a 5 percent, semi-annual coupon and a conversion ratio of 35. The bond has a face value of $1,000 and matures in 18 years. The current yield to maturity is 4.9 percent. Assume that you buy this bond today and sell it one year f..

  What is the current dividend and what is the dividend yield

Using the Wall Street Journal or online sources, look up the following stocks: General Electric, Ford Motors, Microsoft, and Intel, and answer the following questions for each stock. Use the most current information available. What is the current pri..

  Calculate the payback for products

. Assume a $250,000 investment and the following cash flows for two products. Year Product X Product Y 1 $ 90,000 $ 50,000 2 90,000 80,000 3 60,000 60,000 4 20,000 70,000 a. Calculate the payback for products X and Y.

  The current yield on santoss outstanding bonds

Santos energy has 9.5% annual coupon bonds outstanding with 15 years left until maturity. The bonds have a face value (FV) of $1,000 and their current market price (PV) is $1,111.76. what is the YTM on Santos’s bonds? What is the current yield on San..

  Weighted average cost of equity

Calculate Company B’s weighted average cost of equity, given the following information: (a) Dividend: $3.50, (b) Growth Rate: 6.3% (c) Price: $22.30, (d) Debt: $12,000,000, (e) Equity: $10,000,000, and (f) Preferred Stock: $1,000,000.

  Assume no dividend-calculate total return on your investment

You purchased one of AAA Corp.’s 9%, 15-year convertible bonds at its $1,000 par value a year ago when the company’s common stock was selling for $25. Similar bonds without a conversion feature returned 10% at the time. You exercise the conversion fe..

  Purchase of the investment and dividends received

Banks Corporation purchased 400 shares of Herman Inc. common stock as an available-for-sale investment for $13,200. During the year, Herman paid a cash dividend of $3.25 per share. At year-end, Herman stock was selling for $34.50 per share.

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