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1. Oxygen Optimization just bought a new filtration system for 212,400 dollars. To pay for the filtration system, the company took out a loan that requires Oxygen Optimization to pay the bank a special payment of 102,200 dollars in 6 year(s) and also make regular annual payments forever. The first regular payment is expected in 1 year and is expected to be 1,600 dollars. All subsequent regular payments are expected to increase by a constant rate each year forever. The interest rate on the loan is 12.33 percent per year. What is the annual growth rate of the regular payments expected to be? Answer as a rate in decimal format so that 12.34% would be entered as .1234 and 0.98% would be entered as .0098.
2. Vivian owns a(n) laser tag center that is worth 318,515 dollars and is expected to make annual cash flows forever. The cost of capital for the laser tag center is 11.51 percent. The next annual cash flow is expected in one year from today and all subsequent cash flows are expected to grow annually by 3.43 percent. What is the cash flow produced by the laser tag center in 3 years from today expected to be?
3. You own two investments, A and B, that have a combined total value of 96,422 dollars. Investment A is expected to make its next payment in 1 month. A’s next payment is expected to be 370 dollars and subsequent payments are expected to grow by 0.74 percent per month forever. The expected return for investment A is 1.14 percent per month. Investment B is expected to pay 91 dollars each quarter forever and the next payment is expected in 3 months. What is the quarterly expected return for investment B? Answer as a rate in decimal format so that 12.34% would be entered as .1234 and 0.98% would be entered as .0098.
Suppose a company has $31 in market value of equity, $58 in market value of preferred stock, $78 in outstanding bank term loans, and $78 of outstanding long term debt. if the cost of capital for those components before tax is 10.88%, 5.66%, 4.59%, an..
Four business associates create a business that will develop and sell information technology software. The business will be incorporated.
A call option has an exercise price of $50. What is the value of the call option at expiration if the stock price is $35? $70? A put option has an exercise price of $30. What is the value of the put option at expiration if the stock price is $25? $40..
The old forklift has no present or future net salvage value, as its scrap metal value just equals the cost to haul it away.
A two yr. treasury bond has annual coupon pmts. Describe how an arbitrage situation could be developed.
Today, the Big Foot Shoe Company paid dividends of $1.50 per share of common stock. You are considering purchasing some stock in this company but don’t want to pay to much for it. If an appropriate discount rate for this stock is 12%, what would be t..
What is bankers acceptance? How is it useful in international trade finance? What is the difference between confirmed and unconfirmed letter of credit?
Stock buybacks should be considered with other alternative investments, using the same criteria of payback, NPV or IRR.
A portfolio has 30% of its value in IBM SHARES and the rest in Microsoft (MSFT). The volatility of IBM and MSFT are 40% and 30%, respectively, and the correlation between IBM and MSFT IS -0.5. What is the standard deviation of the portfolio?
The market value of XYZ Corporation's common stock is $40 million and the market value of its risk-free debt is $60 million. what is the firm's cost of capital?
The expected net cash inflows are $17,000 a year for seven years. What is the net present value of the Sister Pools project?
Last year, California Sushi and Such (CSS) had sales of $65 million. The firm's operating expenses amounted to $20 million and costs of goods sold totalled $15 million. In addition, CSS received $80,000 in dividend income, and paid $300,000 in divide..
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