Unique investment opportunity

Assignment Help Financial Management
Reference no: EM131835144

You have been offered a unique investment opportunity. If you invest $25,000 ?today, you will receive $$1,250 one year from? now, $3,750 two years from? now, and $25,000 ten years from now.

a. What is the NPV of the investment opportunity if the interest rate is 12% per? year? Should you take the? opportunity?

b. What is the NPV of the investment opportunity if the interest rate is 8% per? year? Should you take the? opportunity?

Reference no: EM131835144

Questions Cloud

What was annual increase in selling price : Assume that in January 2013, the average house price in a particular area was $286,400. What was the annual increase in selling price?
Saving up for down payment on house : Suppose you are saving up for a down payment on a house.
What is the present value of your? windfall : What is the present value of your? windfall? What is the future value of your windfall in three years? (on the date of the last? payment)?
Annual rate of interest must you earn on your investment : What annual rate of interest must you earn on your investment to cover the cost of your child’s college education?
Unique investment opportunity : You have been offered a unique investment opportunity.
Account immediately after the third deposit is made : how much will be in the account immediately after the third deposit is made?
Demonstrate that the internal rate of return of investment : Demonstrate that the internal rate of return of the investment is 13.51%.
Small appliance company is negotiating commercial loan : Anderson Small Appliance Company is negotiating a commercial loan of $450,000 with two banks.
Bonds is equal to the stated rate on the bond contract : The coupon rate or required return of bonds is equal tothe stated rate on the bond’s contract.

Reviews

Write a Review

Financial Management Questions & Answers

  Reasonable costs of capital for average-risk-high-risk

Distinguish between beta (i.e market) risk, within-firm ( i.e,corporate) risk, and stand-alone risk for a potential project. Of the three measures, which is theoretically the most relevant, and why? Suppose a firm estimates its overall cost of capita..

  What is the standard deviation of a portfolio

Stock Q will return 18% in a boom and 9% in a normal economy. Stock R will return 9% in a boom and 5% in a normal economy. There is a 75% probability the economy will be normal. What is the standard deviation of a portfolio that is invested 40% in st..

  Interest rates and exchange rates

Suppose you find the following rates: Interest rates: U.S.: 3 percent and EU: 4 percent. Exchange rates: Spot; $1.0650; One year forward: $1.0525. What will be the outcome of $100 invested in the U.S. market? What will be the outcome of investing $10..

  Compute the premium of put with the same exercise price

Use the put-call parity to compute the premium of a put with the same exercise price.

  What is the stocks expected price five years from now

Whited Inc.’s stock currently sells for $35.25 per share. The dividend is projected to increase at a constant rate of 4.75% per year. The required rate of return on the stock, rs, is 11.50%. What is the stock’s expected price 5 years from now? Show s..

  Accounts receivable-what is the effective annual rate

A firm has $500,000 in accounts receivable. A commercial bank will accept these accounts receivable as collateral and will advance the firm 75% of the accounts receivable amount on loan at 6%. The bank charges a $5,000 credit checking fee. The firm w..

  Calculate the break-even volume

A regional soft drink manufacturer is considering opening a new manufacturing plant in the Midwest. Its total fixed costs are $100 million, with the cost of the new plant included in that figure at a depreciated value based on the expected life of th..

  Assume investor writes put option with strike price

Assume an investor writes a put option with a strike price of $35 for a premium of $2.80. This is a naked option (15 points) a. Evaluate potential gains and losses at expiration for the stock prices of 25, 35, and 45. b. What would be the break-even ..

  Describe reason for bond to receive credit rating upgrade

what will the account balance be after 4 years? Which of the following events would best describe the reason for a bond to receive a credit rating upgrade:

  Prepare the companys cash budget

Parliman Corporation is preparing its cash budget for August. The budgeted beginning cash balance is $12,000. Budgeted cash receipts total $159,000 and budgeted cash disbursements total $162,000. Prepare the company's cash budget for August in good f..

  Firm capital funding should be debt financing

The Color Box uses a combination of common stock, preferred stock, and debt financing. The company wants preferred stock to represent 7 percent of the total financing. It also wants to structure the firm in a manner that will produce a weighted avera..

  Options on microsoft stock-compute the gross profit

Consider options on Microsoft stock. Suppose that there are call options with a strike price of $10 and put options with a strike price of $10, both with the expiration date of January 16th.

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