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Natasha is 30 years old and currently employed as a Tier 2 field service representative for a telephony corporation and earns $38,000 a year that she anticipates will grow at 3% per year. Natasha has $75,000 that she inherited from her aunt. she invited this money in 10 years Treasury Bond. She is considering wither she should further her education and would use her inheritance to pay for it. She was investigating a couple of options and is asking for your help as a financial planning intern to determine the financial consequences associated with each option. Natasha has already been accepted to two programs and could start either one soon. One alternative is attaining a certification in network design. This certification would automatically promote her to a Tier 3 field service representative. The base salary for a Tier 3 representative is $10,000 more than the salary of a Tier 2 representative, and she anticipates that this salary differential will grow at a rate of 3%for as ling as she remains employed. The certification program. The average amount of time to finish the program is 1 year. The total cost of the program is $5,000 du when she enrolls in the program. Natasha does not expect to lose any income duting the certification program. Another option is going back to school for an MBA degree. With an MBA degree Natasha expects to be promoted to a manager position in her current firm. The managerial position pays $20,000 a year more than her current position. She expects that the salary differential will also grow at a rate of 3% per year as long as she keeps working. The program will take 3 years to complete, costs $25,000 per year due at the beginning of each of her three year in school. Natasha does not expect to lose any income while she is in school. Questions: 1) Following the instructions in Ch4 case, what is Natasha's discount rate when she tries to make a decision to pursue more training/education? The discount rate is 1.54 ( I fount it on the financeyahoo.com and is the correct one..so far is the only correct answer that I got) 2) What is the present value of the salary differential for completing the certification program? 3) What is the net present value of undertaking the certification program? (You subtract the cost of the program from the answer in the previous question to get the net present value). 4) What is the present value of the salary differential for completing the MBA degree? 5) What is the net present value of undertaking the MBA? (You subtract the cost of the program from the answer in the previous question to get the net present value).
Clay Harden borrowed $37,000 from a bank at an interest rate of 8% compounded monthly. The loan will be repaid in 36 equal monthly installments over three years. Immediately after his 22th payment, Clay desires to pay the remainder of the loan in a s..
First National Bank pays 6.8% interest compounded semiannually. Second National Bank pays 6% interest, compounded monthly. Calculate the future value for each dollar invested in First National (Assume you invest $1).
Chandeliers Corp. has no debt but can borrow at 7.8 percent. The firm’s WACC is currently 9.6 percent, and the tax rate is 35 percent. What is the company’s cost of equity? If the firm converts to 30 percent debt, what will its cost of equity be? If ..
Which of the following will NOT increase equity returns in an LBO?
Suppose that you bought Mike Inc. three years ago at $20.50 per share and you can now sell it for 21.74 per share now. Also, Mike Inc. has paid an annual dividend of $0.50, $0.47, and $0.63 in years one, two, and three. Ignoring the issue of Time Val..
Springfield Nuclear Energy Inc. bonds are currently trading at $1,639.76. The bonds have a face value of $1,000, a coupon rate of 10.5% with coupons paid annually, and they mature in 10 years. What is the yield to maturity of the bonds?
When we refer to the "risk-free interest rate," we mean the rate on U.S. Treasuries. Interest rates vary with the investment horizon. All borrowers, besides the U.S. Treasury, have some risk of default.
Suppose you sell a fixed asset for $50,000 when its book value is $60,000. If your company's marginal tax rate is 40%, what will be the effect on cash flows of this sale (i.e., what will be the after-tax cash flow of this sale)?
You are being offered an investment that will pay you (and your heirs) $19,853 per year forever, starting 16 years from now. If your discount rate on this investment is 5.8 percent, how much would you be willing to pay for it today?
Kinkead Inc. forecasts that its free cash flow in the coming year, i.e., at t = 1, will be -$10 million, but its FCF at t = 2 will be $20 million. After Year 2, FCF is expected to grow at a constant rate of 4% forever. If the weighted average cost of..
The Marietta Corporation, a large manufacturer of mufflers, tailpipes, and shock absorbers, is currently carrying out its financial planning for next year. In about two weeks, at the next meeting of the firm’s board of directors, Frank Bosworth, vice..
Rogers Inc. had 500,000 shares of $3 par common stock outstanding at the end of both 2013 and 2014. Retained earnings at the end of 2013 amounted to $2,700,000. No dividends were paid during 2014, and net income for the year was $590,000. Determine R..
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