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1. White Mountain Packaging just bought a new ice cream parlor for 592,410 dollars. To pay for the ice cream parlor, the company took out a loan that requires White Mountain Packaging to pay the bank a special payment of 28,570 dollars in 3 months and also make regular monthly payments forever. The first regular payment is expected in 1 month and all subsequent regular payments are expected to increase by 0.32 percent per month forever. The interest rate on the loan is 1.33 percent per month. What is the payment expected to be in 1 month?
2. Goran has an investment worth 415,162 dollars. The investment will make a special payment of X to Goran in 4 quarters in addition to making regular quarterly payments to Goran forever. The first regular quarterly payment to Goran is expected to be 4,550 dollars and will be made in 3 months. All subsequent regular quarterly payments are expected to increase by 0.89 percent per quarter forever. The expected return for the investment is 2.03 percent per quarter. What is X, the amount of the special payment that will be made to Goran in 4 quarters?
3. You own a store that is expected to make annual cash flows forever. The cost of capital for the store is 14.61 percent. The next annual cash flow is expected in one year from today and all subsequent cash flows are expected to grow annually by 3.62 percent. What is the value of the store if you know that the cash flow in 7 years from today is expected to be 22,300?
Mary and Carlos want to buy a $400,000 house. They have $50,000 for a down payment. Their lender is offering them a 30 year mortgage at 6.2%. What is their total mortgage payment (principal & interest + escrow)?
Suppose an employer offers a base wage of $20/hr. for the first 40 hrs. and overtime pay of $30/hr. for any hours beyond 40 per week. The employer allows workers to choose their own hours of work. Compute the average weekly earnings for both employee..
We-Dump-It is in the business of disposing of toxic chemicals.
Construct the zero coupon yield curve for year 1, year 2 and year 3 under the unbiased expectation hypothesis and the fisher hypothesis.
A four-year bond has an 8% coupon rate and a face value of $1,000. If the current price of the bond is $878.31, calculate the yield to maturity of the bond (assuming annual interest payments).
You work for a pharmaceutical company that has developed a new drug. What is the present value of the new drug if the interest rate is 8% per? year?
Another company is in the process of determining its WACC. What is the after-tax cost of debt? What is the cost of equity?
An asset costs $840,000 and will be depreciated in a straight-line manner over its three-year life. It will have no salvage value. The lessor can borrow at 5.8 percent and the lessee can borrow at 8.8 percent. The corporate tax rate is 34 percent for..
Suppose you held a diversified portfolio consisting of a $7,500 investment in each of 20 different common stocks. The portfolio's beta is 0.92. Now suppose you decided to sell one of the stocks in your portfolio with a beta of 1.0 for $7,500 and use ..
Calculate the internal rate of return on the following set of cash flows, according to Teichroews economic interpretation of internal rate of return.
Assume that you are a US manufacturer and frequently undertake export and import transactions with a particular country (China). What is the best way to hedge?
AOL is considering two proposals to overhaul its network infrastructure. they have received two bids. the first bid from Huawei will require a $25 million upfront investment and will generate $20 million in savings for AOL each year for the next thre..
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