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Diane has just turned 18 and also completed high school and is wondering about the value of a college education. She is pretty good with numbers, and driven by financial considerations only, so she sits down to calculate whether it is worth the large sum of money. She knows that her first year tuition will be $12,000, due at the beginning of the year (that is, right away). Based on historical trends she estimates that tuition will rise at 6% per year for the 4 years she is in school. She also estimates that her living expense above and beyond tuition will be $8,000 per year (assume this occurs at the end of the year) for the first year and will increase $500 each year thereafter to keep up with inflation. She does not plan to work at all while attending school. Were she to forgo college she would be able to make $25,000 per year out of high school and expects that to grow 3% annually. With the college degree, she estimates that she will earn $45,000/year out of college, again with annual 3% increases in salary. Either way, she plans to work until turning 60 (she begins college right away). The interest/discount rate is 6%. What is the NPV of her college education (rounding to the nearest dollar)? Note: All cash flows except tuition payments occur at the end of the year.
After spending $10,000 on client development, you have just been offered a big production contract by a new client.
A stock index is currently 990, the risk-free rate is 5%, and dividend yield on index is 2%. How much does option holder gain by being able to exercise early.
Assume that Temp Force's dividend is expected to experience nonconstant growth of 30% from year 0 to year 1, 25% from year 1 to year 2,
Loaded-Up Fund charges a 12b-1 fee of 1% and maintains an expense ratio of 0.85%. Assume the rate of return on both funds’ portfolios is 7% per year.
Calculate the expected return, variance and standard deviation for each share.
Winston Enterprises would like to buy some additional land and build a new factory. The anticipated total cost is $136 million. The owner of the firm is quite conservative and will only do this when the company has sufficient funds to pay cash for th..
Your firm is contemplating the purchase of a new $850,000 computer-based order entry system. The system will be depreciated straight-line to zero over its 5 year life. It will be worth $75,000 at the end of that time. You will save $320,000 before ta..
what is the current value of these bank bills? If volume increases the variable costs will:
What is the present value of the interest tax shields from this? debt?
What types of factors might inhibit ability of rational investors to profit from any pricing errors that are result of actions taken by “behavioral investors”?
The real risk free rate is assumed to be constant over time. What is the real risk free rate of interest?
An electronics firm invested $60,000 in a precision inspection device. It cost $4000 to operate and maintain in the first year and $3000 in each of the subsequent years. At the end of 4 years, the firm changed their inspection procedure, eliminating ..
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