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1.You are thinking of building a new machine that will save you $1000 in the first year. The machine will then begin to wear out so that the savings decline at a rate of 2% per year forever.What is the present value of the savings if the interest rate is 5% per year?
2.You work for a pharmaceutical company that has developed a new drug. The patent on the drug will last 17 years. You expect that the drug’s profits will be $2 million in its first year and that this amount will grow at a rate of 5% per year for the next 17 years. Once the patent expires,other pharmaceutical companies will be able to produce the same drug and competition will likely drive profits to zero. What is the present value of the new drug if the interest rate is 10% per year?
3.Your oldest daughter is about to start kindergarten at a private school. Tuition is $10,000 per year, payable at the beginning of the school year. You expect to keep your daughter in private school through high school. You expect tuition to increase at a rate of 5% per year over the 13 years of her schooling. What is the present value of the tuition payments if the interest rate is 5% per year? How much would you need to have in the bank now to fund all 13 years of tuition?
certain industries are subject to peculiar financing and operating conditions calling for special consideration in
1. what role do financial institutions play within the global marketplace? 2. how can policies and regulations impact
An investment has an expected return of 8% per year with a standard deviation of 4%. Assuming that the returns on this investment are at least roughly normally distributed, how frequently do you expect to lose money?
You own a portfolio that consists of $18,000 in stock A, $4,600 in stock B, $13,000 in stock C, and $5,500 in stock D. What is the portfolio weight of stock D?
davidson company is a limited liability company. it earned 100000 in its first year of operation. it may elect to be
Suppose the maturities of the two bonds are extended to 10 years. What will be the prices of the two bonds given a required yield of 8 percent?
Choose the most appropriate financial institution type for each of the following scenarios. Describe your selection and describe at least the several features of each of your selections.
A home purchased for 122 thousand dollars in 2002 is sold for 220 thousand dollars in 2006. What is the average annual percentage increase?
The Landers Corporation needs to raise $1 million of debt on a 25-year issue. If it places the bonds privately, the interest rate will be 11 percent. Which plan offers the higher net present value? For each plan, compare the net amount of funds ini..
Discuss how this might affect the apportionment of the representation in House of Representative.
According to Keynesian economics, which of the following is most likely to raise the unemployment rate?
If your company aftertax cost of debt is 6 percent, the cost of preferred stock is 10%, and the cost of common stock is 11 percent, determine the Weighted Average Cost of Capital?
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