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You are selling a tractor for dollar 10,000. The buyer can pay dollar 3,000 now, dollar 2, 500 new year, dollar 1, 500 in two years, and dollar 3,000 in three years. If you require an 8% interest rate, would you accept offer? Using the same circumstances, would you accept an offer paying dollar 2, 200 per year for six years? The first payment is one year from the purchase date.
An insurance firm agrees to pay you $6,620 at the end of 20 years if you pay premiums of $200 per year at the beginning of each year for 20 years. Find the internal rate of return.
For this discussion, assume the role of an investor. How would you know whether the company you are considering to invest in has repurchased any of its own stock and/or issued stock dividends during the current period? Why is this important, and woul..
TV’s R Yours is advertising a deal, in which you buy a flat screen TV for $4,769 (including tax) with one year before you need to pay (no interest is incurred if you pay by the end of the one year). How much would you need to deposit at the end of ea..
The nominal rate of return on large-company stocks consists of a:
A resort hotel has total annual sales revenue of $1,000,000, variable costs of $350,000, and fixed costs of $570,000. The fixed costs include $80,000 a year for land rental lease. Calculate the hotel’s breakeven point. If the owners had an equity in..
A Treasury bond that matures in 10 years has a yield of 6%. A 10-year corporate bond has a yield of 9%. Assume that the liquidity premium on the corporate bond is 0.5%. What is the default risk premium on the corporate bond?
NPV versus IRR Consider the following cash flows on two mutually exclusive projects for the Bahamas Recreation Corporation (BRC). Both projects require an annual return of 14 percent. To be prudent, you compute the NPV for both projects. Which projec..
A 1000 seven-year 6% bond with semi-annual coupons is redeemable for 1065. It was originally purchased at issue for 970. It is sold after 45 months for 995. Find the accrued interest by the theoretical method using the new yield to maturity.
The stock price of Tomboy, Inc. is $58.78. Investors require a 8.6 percent rate of return on similar stocks. If the company plans to pay a dividend of $3.14 next year, what growth rate is expected for the company’s stock price?
Explain CVP analysis in detail with suitable example. Evaluate various capital investment alternatives. Describe the planning-and-control cycle and the five key dimensions of budgeting. Calculate costs using activity-based costing method with suitabl..
You have been hired to value a new 30-year callable, convertible bond. The bond has a coupon rate of 5.4 percent, payable semiannually, and its face value is $1,000. The conversion price is $62, and the stock currently sells for $49. What is the mini..
Ajax desires to earn a 12 percent after-tax rate of return on this lease. What are the required annual beginning-of-year lease payments?
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