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1. You expect to receive an annuity of $1,000 per year for the next five years. The market rate of interest is 12%. Assuming that you do not spend any of the income at any other time, what is the future value of these payments at the end of five years? What is the value today?
2. Consider a perpetuity that pays $1,000 per year; the market rate of interest is 10%. What is the PV of the perpetuity? What is the PV of the perpetuity three years from now? What is the PV of the perpetuity 20 years from now? Under what circumstances does the value of the perpetuity change?
Carry-ALL plans to sell 1,300 carriers next year and has budgeted sales of $46,000 and profits of $22,000. Variable costs are projected to be $20 per unit. Michael Co. offers to pay $24,500 to buy 570 units from Carry-ALL.
How can options sell for more than their exercise value and whats wrong with using payback period? What should we use instead? Why?
In its 2009 annual report, The Coca-Cola Company reported sales of $30.99 billion for fiscal year 2009 and $31.94 billion for fiscal year 2008. The company also reported operating income (roughly equivalent to EBIT) of $8.23 billion in 2009 and $8.45..
What are the various kinds of budgets? Please explain each
Gilliland Motot, Inc., paid a $4.46 dividend last year. If Gilliland's return on equity is 31%, and its retention rate is 31%, what is the value of the common stock if the investors require a rate of return of 18%?
What is the present value of a perpetuity that pays you annual, end-of-year payments of $950.00? Use a nominal rate (monthly compounding) of 7.50%.
Company sells 2,391 chairs a year at an average price per chair of $170. The carrying cost per unit is $30.15. The company orders 499 chairs at a time and has a fixed order cost of $92 per order. The chairs are sold out before they are restocked. How..
Conch Republic Electronics is a midsized electronics manufacturer located in Key West, Florida. The company president is Shelly Couts, who inherited the company. The company originally repaired radios and other household appliances when it was founde..
A stock is expected to pay a dividend of $1.50 per share in 2 months and 5 months. The stock price is $50, risk free rate is 8%. An investor has taken a long position in a 6 month forward contract on a stock Three months later the price of the stock ..
A person wins $10,000 in a state lottery. He plans to deposit this money in a savings account to earn 8% annual interest for 6 years. If he wants to withdraw equal annual amounts from the account for 6 years, starting with the first withdrawal one ye..
First National Bank has a credit card department. The average cardholder charges $600 a month, and pays off the entire balance 60 days after the purchase. The cardholders do not pay any interest, but they do pay $25 membership fee, in advance, every ..
You have a chance to buy an annuity that pays $10,000 at the beginning of each year for 10 years. You could earn 5.75% on your money in other investments with equal risk. What is the most you should pay for the annuity?
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