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Suppose you are going to receive $15,000 per year for five years. The appropriate interest rate is 10 percent.
a. What is the present value of the payments if they are in the form of an ordinary annuity? What is the present value of the payments if the payments are an annuity due?
b. Suppose you plan to invest the payments for five years. What is the future value if the payments are an ordinary annuity? What is the future value if the payments are an annuity due?
c. Which has the higher present value, the ordinary annuity or annuity due? Which has the higher future value?
Specialization in lending helps to reduce an asymmetric information problem in lending,
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Your company will generate $76,000 in annual revenue each year for the next seven years from a new information database. If the appropriate interest rate is 7.75 percent, what is the present value of the savings?
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What is the firm's cost of equity using each of these three approaches?
Assume that you are on the financial staff of Vanderheiden Inc., and you have collected the following data: The yield on the company’s outstanding bonds is 7.75%, its tax rate is 40%, the price of the stock is $17.00 per share, the flotation cost for..
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