What is the pv of the perpetuity

Assignment Help Financial Management

Reference no: EM131981941

1. Calculate the required rate of return for Hurley Corp, assuming that (1) investors expect a 1.5% rate of inflation in the future, (2) the real risk-free rate is 2.5%, (3) the market risk premium is 5.0%, (4) the firm has a beta of 1.25.

A. 9.25%

B. 10.00%

C. 10.25%

D. 12.75%

2. Consider a perpetuity paying $2,000 a year. If the interest rate is 5 percent, what is the PV of the perpetuity? If the rate were to increase would the value of the perpetuity increase or decrease? PV = CF/r

A. $2,100.00 decrease

B. $40,000.00 decrease

C. $40,000.00 increase

Reference no: EM131981941

Questions Cloud

What will the shares be worth in 5 years : What would be the actual price of the bond be under each interest rate change in part (b) using the traditional present value bond pricing techniques?

Write a four pages essay which adequately address the topic : Write a 3-4 page essay (750-1,000 words) which adequately address the topic and requirements stated below. Compare 2 ways your subjects are similar.

What are the consequences of each alternative : You are now a student representative on the judicial board at school. The student who kept the iPod is accused of stealing.

What is the theoretical yield of ammonia in grams : Ammonia (NH3) was prepared by reacting 1.55 moles of nitrogen gas with an excess amount of hydrogen gas according to the following reaction.

What is the pv of the perpetuity : Consider a perpetuity paying $2,000 a year. If the interest rate is 5 percent, what is the PV of the perpetuity?

Understanding of developments within business management : Demonstrate knowledge and application of international standards relating to sustainability, values & norms, and business ethics within a global context

Contain the same number of electrons : Explain why these ions have different sizes even though they contain the same number of electrons.

Marker change its chemical composition : How does water running over a limestone grave marker change its chemical composition?

Calculate net sale proceeds from the sale of the property : Calculate the net sale proceeds from the sale of the property. Calculate the monthly mortgage payment. What is the total per year?

User Account

All Pages