What discount rate are investors using to value investment

Reference no: EM13323952

Company Z is offering 2 possible investments with the same level of risk. Investment A is a perpetuity. with the first cash flow, of $100.00 per year, coming in one year. Investment B is also a perpetuity, paying $100.00 per year, but its first cash flow occurs in two years.

(a) Which investment is more valuable today ? Why ?

(b) Suppose that the difference in today's prices of Investment A and Investment B is $93.46. What discount rate are investors using to value the investments? Show calculation.

Reference no: EM13323952

Questions Cloud

Should lisowski laptops offer the new computer : At that time, the market value of the projects assets will be about $70,000. LL's Tax rate is 40 percent and its required return on projects such as this one is 17 percent. Should Lisowski Laptops offer the new computer?

Write an int method named sum that accepts an integer array : Write an int method named sum that accepts an integer array , and the number of elements in the array and returns the sum of the elements of the array .

How much will you spend in fuel on your trip : You select a rental package that includes a car with an average consumption of 6.00 liters of fuel per 100 km. how much (in US dollars) will you spend in fuel on your trip

Wildlife and recreation program : Case Study International Paper’s Wildlife and Recreation Program

What discount rate are investors using to value investment : Company Z is offering 2 possible investments with the same level of risk. Investment A is a perpetuity. with the first cash flow, of $100.00 per year, coming in one year - Which investment is more valuable today

By how much does her mass increase : A person scuffing her feet on a wool rug on a dry day accumulates a net charge of -40?C. By how much does her mass increase

Determine the magnitude of the force on each charge : A charge of 2.05mC is placed at each corner of a square 0.160m on a side. Determine the magnitude of the force on each charge

Create program that allows user to enter sets of inter value : create a program that allows a user to enter sets of inter values, in any order.Per set of data, the program is to output the largest number.

How can we forecast the values of a time series : How can we forecast the values of a time series that contains a secular trend as well as strong seasonal and random variations?

User Account

All Pages