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NOTE: This assignment is in two parts, one is quantitative problem, the other a short paper. You need to turn in both Part I and Part II to receive full credit for this assignment.Part I: This part of the assignments tests your ability to calculate present value.A. Suppose your bank account will be worth $15,000.00 in one year. The interest rate (discount rate) that the bank pays is 7%. What is the present value of your bank account today? What would the present value of the account be if the discount rate is only 4%?B. Suppose you have two bank accounts, one called Account A and another Account B. Account A will be worth $6,500.00 in one year. Account B will be worth $12,600.00 in two years. Both accounts earn 6% interest. What is the present value of each of these accounts?C. Suppose you just inherited an gold mine. This gold mine is believed to have three years worth of gold deposit. Here is how much income this gold mine is projected to bring you each year for the next three years:Year 1: $49,000,000Year 2: $61,000,000Year 3: $85,000,000Compute the present value of this stream of income at a discount rate of 7%. Remember, you are calculating the present value for a whole stream of income, i.e. the total value of receiving all three payments (how much you would pay right now to receive these three payments in the future). Your answer should be one number - the present value for this gold mine at a 7% discount rate but you have to show how you got to this number.Now compute the present value of the income stream from the gold mine at a discount rate of 5%, and at a discount rate of 3%. Compare the present values of the income stream under the three discount rates and write a short paragraph with conclusions from the computations.Part II: Read the following three sample business plans:Ice Dream- https://www.bplans.com/shaved_ice_beverage_business_plan/executive_summary_fc.phpR J Wagner & Associates Realty- https://www.bplans.com/real_estate_brokerage_business_plan/executive_summary_fc.phpInterstate Travel Center- https://www.bplans.com/truck_stop_business_plan/executive_summary_fc.phpWhich of these three projects do you think should have the highest risk from the point of view of investors (potential providers of funds) and would therefore be evaluated using the highest discount rate? Which one do you think should have the lowest? Write a paper explaining your reasoning.In your assessment of the business plans consider the possible risk of each plan. Risk is one of the main considerations when deciding whether a plan should be evaluated and discounted to present value using a high or a low discount rate.Note: you are not expected to fully analyze the numbers and financial statements in these business plans. There are only forecasts and projections. Nobody really believes them anyway. Use your intuition rather than calculations to assess risk and potential of each of these plans.
which is more likely to have a high debt-to-equity ratio anelectric utility or a high tech company and
wine and roses inc. offers a 8.0 percent coupon bond with semiannual payments and a yield to maturity of 8.78 percent.
The company X has been in business for 100 years. For the last 3 years this company reported operating losses. Which set of financial statement users is most likely to be influenced by this earnings management?
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what are the benefits and costs of placing a financially troubled company into a bankruptcy proceeding? is this a
Initially Firm A has a beta of 1.3, when Rrf= 7 percent and Rm=12 percent. The firm now sells 10 percent of its assets (beta=1.2) and uses the proceeds to purchase another asset, a sanding machine, with a beta of .7.
Calculate the imputed interest on a 10 year zero-coupon $1,000 bond in its second year given a yield-to-maturity of 6%.
explain how analysis of financial statements is used to evaluate a companys liabilities both existing and
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Would the future value larger or smaller if the compounded period was six month? How much more or less would they have earned with this shorter compounded period?
Fama's Llamas has a WACC of 10.30 percent. The company's cost of equity is 13.2 percent, and its cost of debt is 8.9 percent. The tax rate is 40 percent.
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