An investment project has annual cash inflows of $4,900, $3,400, $4,600, and $3,800, for the next four years, respectively. The discount rate is 13 percent. What is the discounted payback period for these cash flows if the initial cost is $5,200?
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The market price of a security is $65. Its expected rate of return is 12.2%. The risk-free rate is 5% and the market risk premium is 9.2%. What will be the market price of the security if its correlation coefficient with the market portfolio doubles ..
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If all capital outlays are funded from retained earnings and new borrowings and if Clynne follows a residual dividend policy, what capital outlays are planned for the coming year?
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Genetic Insights Co. purchases an asset for $15,305. This asset qualifies as a seven-year recovery asset under MACRS. The seven-year fixed depreciation percentages for years 1, 2, 3, 4, 5, and 6 are 14.29%, 24.49%, 17.49%, 12.49%, 8.93%, and 8.93%, r..
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Stock J has a beta of 1.38 and an expected return of 14.06 percent, while Stock K has a beta of 0.93 and an expected return of 11 percent. You want a portfolio with the same risk as the market. What is the portfolio weight of each stock? What is the ..
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What effect does compounding interest more frequently than annually have on (a) the future value, and (b) the effective annual rate (EAR)? Explain. How would you explain the difference between the annual percentage rate (APR) and effective annual rat..
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Acme Medical Supply Company desires a target operating income amount of $100,000, with assumption inputs as follows: Desired (target) operating income amount = $100,000 Unit price for sales = $80 Variable cost per unit = $60 Total fixed cost = $60,00..
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At the beginning of 2013, Melinda Taylor, age 70, had a traditional IRA with a balance of $136,600, which included $108,600 of nondeductible contributions. Melinda withdrew $40,000 from her IRA in 2013. Compute the taxable portion of the $40,000 with..
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The current price of a non-dividend-paying stock is $40. Over the next six months it is expected to rise to $42 or fall to $37. An investor buys put options with a strike price of $41. The risk-free interest rate is 2% per annum with continuous compo..
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Every two weeks a mortgage payment is made that is exactly one half of the traditional monthly mortgage payment. The APR is 6.1 on a $35,000,000 30 year note. How long would it take to pay off the smart loan? Why is this shorter than the time needed ..
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The YTM on a bond is the interest rate you earn on your investment if interest rates don’t change. If you actually sell the bond before it matures, your realized return is known as the holding period yield (HPY). a. Suppose that today you buy a bond ..
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You are becoming addicted to World of Cowcraft, a popular MMORPG. After playing for a few hours, you estimate that in the next hour, you can produce 100 WoC gold. If these estimates hold up, how much WoC gold in total can you mine in the next 50 hour..
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