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Earlier this week the Big Game Lottery jackpot hit $351 million. The winner(s) will get $13.5 million a year for 2 years (with the first payment at time zero). But the winner(s) will have to pay income taxes. After taxes, if there is a single winning ticket, the winner can choose a one-time payoff of $114 million or $8.9 million a year for 26 years (with the first payment at time zero).
What is the embedded rate of return associated with the two alternative modes of payoff?
Assume you won the Big Game Lottery and wanted a payoff over time. If you thought you could earn 5 percent after tax on invested funds, would you rather take the one-time $114 million or the $8.9 million per year? Why?
You purchased 200 shares of stock for $23 per share exactly one year ago. During the year, the stock paid a $1.10 dividend per share and the current stock price is $18 per share. The inflation rate the last year was 2%.
Baker Brothers has a DSO of 27 days, and its annual sales are $4,745,000. What is its accounts receivable balance? Assume that it uses a 365-day year. Round your answer to the nearest cent.
What are the advantages and disadvantages of a call provision from the viewpoints of both a firm and its bondholders? If you were the CEO of a firm, would you recommend a call provision for a new bond issue? Why or why not? Can you identify a r..
Calculate the duration of the following security: 1.25-year floating coupon paying float + 50 bps semiannually. You know that last quarter the semiannual rate was 6.4%.
Your company has just announced that a new formal performance evaluation system will be used (effective immediately). One of your supervisor's anniversary date is coming up and the human resources (HR) manager has asked you not only to rate this s..
when the genesis and sensible essential teams held their weekly meeting the time value of money and its applicability
Firms often involve themselves in projects that do not result directly in profits. For example, IBM and ExxonMobil frequently support public television broadcasts. Do these projects contradict the goal of maximization of shareholder wealth?
What are the major sections of the Statements of Cash Flows and what elements or basic activities are included in each section? If a negative cash flow exists for a given time period, is this is always bad for the business?
Scenario where venture capital investment is spread over three rounds: $1,500,000 at t=0, 1,250,000 at t=2, and 750,000 at t = 4. Investors at t=0 require.
What TVM concept (s) is represented in the situation? What is the value of the money represented by the situation? How did you arrive a the value?
Draw a graph showing the payoff and profit for a straddle using these options.
The firm's CEO is deciding whether to issue debt or equity in order to raise the funds needed to finance an upcoming project. Which method of financing would you recommend? Why?
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