1. Consider a 1-year, $10,000 CD. a. What is its value at maturity (future value) if it pays 10.0 percent (annual) interest? 11000 b.
If the interest rate is 12% per year, what is the present value of this annuity? a. $1,229.97 b. $496.76 c. $556.38 d. Other 7. Given the following cash flow stream at the end of each year: Year 1: $4,000 Year 2: $2,000 Year 3: 0 Year 4: -$1,000 Using a 10% discount rate, the present value of this cash flow stream is: a.
The bond is currently selling at par ($1,000). Which of the following statements is NOT CORRECT? Question 18 Which of the following statements is CORRECT? Question 19 A 12-year bond has an annual coupon rate of 9%. The coupon rate will remain fixed until the bond matures.
A company issued a 30-year, $1,000 par value bond that has 10.85% coupon rate. Coupons are paid out semi-annually and the relevant interest rate is 9% compounded semiannually. a. (3 points) What was the value of this bond when it was issued? PMT = (.1085/2)*1000=54.25 N = 60 R = 0.09/2=0.045 (or 4.5 for calculator purposes) FV = 1000 PV =?
If the appropriate discount rate for the project is 10 percent, what is the profitability index of the project? 4. What might cause a firm to face capital rationing? 5. The WACC for a firm is 19.75 percent.
b. The future value of $800 saved each year for 10 years at 8 percent. c. The amount that a person would have to deposit today (present value) at a 6 percent interest rate in order to have $1,000 five years from now. d. The amount that a person would have to deposit today in order to be able to take out $500 a year for 10 years from an account earning 8 percent. Solution: a.
c. Internal common equity where the current market price of the common stock is $43.50. The expected dividend this coming year should be $3.25, increasing thereafter at a 7% annual growth rate. The corporation’s tax rate is 34%. d. A preferred stock paying a 10% dividend on a $125 par value. If a new issue is offered, flotation costs will be 12% of the current price of $150.
1. Finding Present Values: What is the present value of the following future payments: a) $1,210 in 2 years at a 10% discount rate: present value = $1,210/(1.10)2 = $1000 b) $1,259.71 in 3 years at an 8% discount rate: present value = $1,259.71/(1.08)3 = $1000 c) $1,040 in 1 year at a 4% discount rate: present value = $1,040/(1.04)1 = $1000 2. General formula for finding the present value of several future annual payments Present Value = P1/(1+r)1 + P2/(1+r)2 + ( +(F + Pn)/(1+r)n Where 1, 2, (n = number of years; r = discount rate; Pn = payment; F = face value 3. Finding Present Values Using the General Formula: a) You can make two different investments. The interest you receive on the first investment is $110 per year for three years.
Basic present value calculations Calculate the present value of the following cash flows, rounding to the nearest dollar: a. A single cash inflow of $12,000 in five years, discounted at a 12% rate of return. Present Value | Rate per period | 0.567 | Cash Inflow | 12000 | Present Value | 6804 | b. An annual receipt of $16,000 over the next 12 years, discounted at a 14% rate of return. Present Value | Rate per period | 5.66 | Cash Inflow | 16000 | Present Value | 90560 | c. A single receipt of $15,000 at the end of Year 1 followed by a single receipt of $10,000 at the end of Year 3.
If the required return on this preferred stock is 6.5%, at what price should the preferred stock sell? =Preference Dividend/ Required Return= $7.5/ 6.5%= $ 115.38 13. The Isberg Company just paid a dividend of $0.75 per share, and that dividend is expected to grow at a constant rate of 5.50% per year in the future. The company's beta is 1.15, the market risk premium is 5.00%, and the risk-free rate is 4.00%. What is the company's current stock price, P0?