What is the present value of the insurance product

Assignment Help Financial Management

Reference no: EM131012442

An insurance company will sell Jack Benny a product that costs $280,000. The product will pay $10,000 at the end of this year. Thereafter, the payments will grow annually at a 3 percent rate forever. Jack will be able to invest his cash flows at a rate of 6.5 percent annually. What is the present value of the insurance product and should Jack buy it?

Reference no: EM131012442

Questions Cloud

What if the stock market crashed : Should the supreme court be allowed determine which problems justify a president's refusal to participate in the judicial process?

Find the tension in the cables and their elongation : A beam of negligible mass is supported by two cables when a load P is applied. If P is 100 Ib, find the tension in the cables, their elongation, and the minimum thickness of the beam if it is to be made of aluminum.

Determine the direction and magnitude of vector derivative : State the domain of r. Determine the direction and magnitude of the vector derivative at t = ln(2). Determine the length of the curve from 0 ≤ t ≤ 1.

Based on information provided what will be my free cash flow : My existing business generate $135000 in EBIT. The corporate tax rate applicable to my business is 35%. Deprecaition reported in the financial statement is $25714. I don't need to spend any more for new equipment; however, I need $20250 additiona cas..

What is the present value of the insurance product : An insurance company will sell Jack Benny a product that costs $280,000. The product will pay $10,000 at the end of this year. Thereafter, the payments will grow annually at a 3 percent rate forever. Jack will be able to invest his cash flows at a ra..

Determine maximum nominal average shear stress : Using the method of superposition, draw a neat labelled Bending Moment Diagram and Shear Force Diagram for the beam member shown in Figure 1, and determine the Bending stresses under maximum positive and negative bending moment.

Offshore accounts and tax benefits : An ethical dilemma can be defined as a complex situation that often involves an apparent mental conflict between ethical imperatives, in which to obey one would result in transgressing another. Prepare a one page single spaced paper in APA format in ..

Rapidly expanding chain of fast-food restaurants : Caliber's Burgers and Fries is a rapidly expanding chain of fast-food restaurants, and the firm's management wants to estimate the cost of equity for the firm. As a frim approximation, the firm plans to use the beta for McDonalds Corporation (MCD), w..

Estimate cost of equity using a market risk premium : Smaltz Enterprises is currently involved in its annual review of the firm's cost of capital. Historically, the firm has relied on the CAPM to estimate its cost of equity capital. The firm estimates that its equity beta is 1.25, and the yiled to matur..

User Account

All Pages