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Option A: You can purchase $2,000 of stock in a company. You estimate that this company will earn a total of $10,000 during its life. You expect the company to pay all of these earnings to you as a dividend 10 years from today. Currently, the risk-free rate is 1% but this investment is really risky and you feel that a 14% discount rate is appropriate.
Option B: You can purchase $2,000 worth of bonds. The bond will pay you $250 at the end of each year for three years. At the end of the third year, the bond will also pay you back its $2,000 face value. You feel that this is a very safe investment and a 2% discount rate is appropriate.
Problem 1: Which investment has the highest present value?
Stanwick, a self-employed individual, purchased a piece of equipment for use in his business. The costs associated with the acquistion were $55,000 purchase price, $725 delivery charge, $300 installation fees, and sales tax of $3,400. What is the dep..
Prepare any necessary journal entries for December 31 and for the note's maturity date assuming it is honored - Krugg Company determines on May 1 that it cannot collect $1,000 of its accounts receivable from its customer P. Carroll.
Storm Ltd acquired an item of equipment on 1 July 2013 at a cost of $500,000. On 30 June 2014, Storm’s directors decide to continue using the cost model for equipment. They elect to depreciate the equipment acquired on 1 July 2013 using the straight-..
Current Assets Current Liabilities Intangible Assets Long-term Investments Long-term Debt Property, Plant and EquipmentStockholders' EquityTotal AssetsTotal Current AssetsTotal Current LiabilitiesTotal Intangible AssetsTotal LiabilitiesTotal Liabilit..
Bond A, a $1000 corporate bond with a 5.4% coupon rate, semi--annual coupons, and 30 years to maturity has a YTM of 7.0% APR. Treasuries are currently yielding 2.9%. What is the credit spread on bond A? Briefly explain what the credit spread represe..
The following information pertains to Wise Corp. at January 1, 2014: Common stock, $10 par, 11,000 shares authorized, 2,200 shares issued and outstanding $22,000 Paid-in capital in excess of par, common stock 14,500 Retained earnings 59,800 Wise Corp..
The board of directors declares a cash dividend of $180,000. What is the current ratio after the declaration but before payment?
Joyce, a widow, lives in an apartment with her two minor children (ages 8 and 10), whom she supports. Joyce earns $33,000 during 2014. She uses the standard deduction. Calculate the amount, if any, of Joyce’s earned income credit.
Compute the cost of capital for the project. Explain why it is not necessary to subtract the interest payments and the dividend payments and appreciation from the inflow of $50,000 in carrying out this computation.
What items are restated when preparing constant peso financial statements? Explain gain or loss on purchasing power? What is current cost accounting?
Make the appropriate consolidation journal entry to eliminate the investment in Maserati Ltd on acquisition date. The company tax rate was 28%
What is total shareholders' equity at the end of 2019? Golden Gophers, Inc. (GG) was established on January 1, 2019. GG was authorized to issue 1 million shares
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