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Suppose the Texas lottery advertises that it pays its winner $10 million. However, this prize money is paid at the rate of $500,000 each year (with the rst payment being immediate) for a total of 20 payments. What is the present value of this prize at 10% annual interest rate?
You find a zero coupon bond with a par value of $10,000 and 19 years to maturity. The yield to maturity on this bond is 4.1 percent. Assume semi annual compounding periods. What is the price of the bond?
The expected rate of return on the market portfolio is 9.75% and the risk–free rate of return is 1.75%. The standard deviation of the market portfolio is 19%. representative investor’s average degree of risk aversion = 2.22
Please define and describe in your own words the benefits and disadvantage of using payback period, NPV and IRR as means for evaluating project. Please explain how mutually exclusive projects influence these analysis tools.
The Inventive Co. is considering a new project. This project requires an initial cash investment of $84,000. The project will generate cash inflows of $14,000 in the first year. The net present value of a project's cash inflows is $12,933 at a 11.2 p..
Kayla is in the 28% federal income tax bracket and the 5% state income tax bracket. If Jennifer purchases a municipal bond yielding 4.25%, what is the equivalent yield on a taxable bond if the municipal bond income is exempt from both federal and sta..
Given an anticipated inflation premium of 1.40% and a real rate of interest of 4.14%, what is the nominal interest rate? Round your answer to 4 decimal places.
The most important insight regarding capital structure goes back to Modigliani and Miller: With perfect capital markets, a firm's security choice alters the risk of the firm’s equity, but it does not change its value or the amount it can raise from o..
Consider a firm with an EBIT of $10,500,000. The firm finances its assets with $50,000,000 debt (costing 6.5 percent) and 10,000,000 shares of stock selling at $10.00 per share. Calculate the change in the firm’s EPS from this change in capital struc..
Barbarita’s Linens want to expand into the store next door to set up a Baby Supply Store. She needs $150,000 for the build out and new inventory of the project. How much will the expansion of Barbarita’s Baby Supply Store need to sell in dollars and ..
A firm is considering a project that will generate perpetual after-tax cash flows of $18,000 per year beginning next year. The project has the same risk as the firm’s overall operations and must be financed externally. What is the most the firm can p..
First Simple Bank pays 8.3 percent simple interest on its investment accounts. If First Complex Bank pays interest on its accounts compounded annually, what rate should the bank set if it wants to match First Simple Bank over an investment horizon of..
A 12-year, 5% coupon bond pays interest annually. The bond has a face value of $1,000. What is the change in the price of this bond (give me a percentage change) if the market yield rises to 6% from the current yield of 4.5%?
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