What is the equal amount you should deposit annually

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Reference no: EM132922889

Please answer the following questions (show all your formulas & calculations):

Q1) You are working in the UAE and you have a plan to get retired after 22 years. It is expected to live 12 years' after retirement depends on God grace. You are looking for withdraw $ 11000 per year. What is the equal amount you should deposit annually up to the retirement to meet your objectives? The interest rate is 8%.

Q2) Alfoah company is considering the replacement of its old, fully depreciated production machine. Two new options are available: Machine A, which has a cost of $200,000, a 4-year expected life, and after-tax cash flows of $88,000 per year; and Machine B which has a cost of $370,000, a 7-year life, and after-tax cash flows of $99,300 per year. Assume that Alfoah cost of capital is 13%. Should Alfoah company replace its old production machine? If so, which new machine should it take? By how much would the value of the company increase if it adapted the better machine?

Q3) Emmar company is expected to pay a $1.50 per share dividend at the end of this year (i.e., D1 = $1.50). The dividend is expected to grow at a constant rate of 7% a year. The required rate of return on the stock, rs, is 15%. What is the value per share of Emmar's stock?

Q4) Suppose a firm's common stock paid a dividend of $2 yesterday. You expect the dividend to grow at the rate of 5% per year for the next 3 years; if you buy the stock, you
plan to hold it for 3 years and then sell it.

a. Find the expected dividend for each of the next 3 years; in other words, calculate D1, D2, and D3. Given (D0 = $2).

b. Given that the appropriate discount rate is 12% and that the first of these dividend payments will occur 1 year from now, find the present value of the dividend stream ; the sum these PVs

c. You expect the price of the stock 3 years from now to be $34.73 (i.e., you expect ^P3= $34.73). Discounted at a 12% rate, what is the present value of this expected future stock price?

d. If you plan to buy the stock, hold it for 3 years, and then sell it for $34.73, what is the most you should pay for it?

Reference no: EM132922889

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