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Consider the $50,000 excess cash.Assume that Gary invests the funds in a one -year CD.
a.What is the CD"s value at maturity( future calue)if it pays 10 percent(annual) interest?
b. What will its future value be if the CD pays 5 percent interest? If it pays 15 percent interest?
c.BankSouth offers CDs with 10 percent nominal (stated) interest, but compounded semiannually.What is the effective annual rate on this CD>What will the future value be after one year if $50,000 were invested?
d. The Penescola branch of bank of America offers a 10 percent CD with daily compounding. What are the CD's effective annual rate and its value at maturity one year from now if $50,000 is invested?(Assume a 365 day year)e.What stated rate will BankSouth have to offer to make its semi annual compounding CD competitive with Bank of America's daily -compoundin CD?
You are buying a sofa. You will pay $200 today and make three consecutive annual payments of $300 in the future. The real rate of return is 14.1 percent, and the expected inflation rate is 4 percent. What is the actual price of the sofa?
Why might prices not be strong form effcient? List two reasons and briefly describe.
Selection of a project on the basis Payback and net present value and Which of the two projects should be chosen based on the payback method
How much total cost would be allocated to the Assembly activity cost pool?
D. Butler Inc. needs to raise $14 million. Assuming that the market price of the firm's stock is $95, and flotation costs are 10 percent of the market price, how many shares would have to be issued? What is the dollar size of the issue?
Net working capital will increase at a rate of $3,000,000 per year over the life of the project. Ridgewood has a 35 percent tax rate and a required rate of return of 9 percent. Use the NPV technique and IRR method to evaluate this project.
An option can often have more than one source of value. Consider a logging company. The company can log the timber today or wait another year (or more) to log the timber. What advantages would waiting one year potentially have?
Binder Corp. has invested in new machinery at a cost of $1,450,000. This investment is expected to produce cash flows of $640,000, $715,250, $823,330, and $907,125 over the next four years. What is the payback period for this project?
Why do firms purchase other corporations? Do firms pay too much for the acquired corporation? Why do so many acquisitions result in shareholder losses?
What happens to the value of a perpetuity when interest rates increase? What happens when interest rates decrease. Explain why these changes occur.
Distinguish between a debt security and an equity security. What are the main distinctions between a traditional financial instrument and a derivative financial instrument?
Explain Recommendation for a project based on NPV and What is the project's annual after tax cash flows for years
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