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You want to purchase a $150,000 house with a 10% down payment and the remainder on a one-year, 5% loan. In one year, you sell the house for $162,000 and pay off the loan and its accrued interest. You are in the 25% marginal tax bracket.
Your net return (rounded to two decimal places as a percentage) on the investment is ____________ %
Feedback: From the sale price, you must subtract your loan amount, the interest on the loan, and your initial investment (equity); but also don't forget to add back your tax shield amount on the mortgage interest. Take this amount divided by your initial equity investment.
Suppose that you have a liability of $1000 per year in perpetuity and the current interest rate for discounting this perpetuity is 8%.
Find the profit or loss from this option portfolio on the expiration date of the options, one year from now.
Purple Dalia, Inc. has the following balance sheet statement items. what is the amount of the firm's stockholder's equity?
You sold 800 shares short of Rockwool Inc. at $54 a share. The price of the stock subsequently fell to $38 before rising to $62 at which time you covered the position (that is, closed the short position). What was the percentage gain or loss on this ..
You are cautiously bullish on a stock, currently priced at $10 per share. So, you buy 100 shares at $10 and sell a call option ("write a covered call option") with an exercise price of $12 for which you collect $1.20 per share. Use the CBOE Options V..
Delta Inc. is considering the purchase of a new machine which is expected to increase sales by $10,000 in addition to increasing non-depreciation expenses by $3,000 annually. The firm has a marginal tax rate of 34 percent, and its required rate of re..
Merafe Mining is evaluating the possibility of adding a new product line to its product mix. Why is it important to include inflation when estimating cash flows
Blue Water Systems is analyzing a project with the following cash flows. The cash flows, in order, are -$236,000 (initial cost), $137,400 (year 1 CF), $189,300 (year 2 CF) and -$25,000 (year 3 CF). Should this project be accepted based on the discoun..
What is the total return of your stock investment? What is the total dollar return on your investment?
Projects a and b are mutually exclusive. project a costs 10,000 and is expected to generate cash inflows of 5,000 for 4 years. project b costs 10,000 and is expected to generate a single cash flow in year 4 of 23,000. the cost of capital is 12% which..
Microtech Corporation is expanding rapidly and currently needs to retain all of its earnings; hence, it does not pay dividends. However, investors expect Microtech to begin paying dividends, beginning with a dividend of $0.50 coming 3 years from toda..
If the value of the financial sector is in terms of reducing the individual risk in the economy, what do you think accounts for these imperfections?
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