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.
Nick’s Enchiladas Incorporated has preferred stock outstanding that pays a dividend of $5 at the end of each year. The preferred sells for $50 a share. What is the stock’s required rate of return? A company currently pays a dividend of $2 per share (D0 = $2). It is estimated that the company’s dividend will grow at a rate of 20% per year for the next 2 years, then at a constant rate of 7% thereafter.
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.
P0= D1/ Dividend yield= $26.67 P7= P0 *(1+11%)^7= $ 55.36 15. Nachman Industries just paid a dividend of D0 = $1.32. Analysts expect the company's dividend to grow by 30% this year, by 10% in Year 2, and at a constant rate of 5% in Year 3 and thereafter. The required return on this low-risk stock is 9.00%. What is the best estimate of the stock’s current market value?
Beckham Corporation has semiannual bonds outstanding with 13 years to maturity and are currently priced at $746.16. If the bonds have a coupon rate of 8.5 percent, then what is the after-tax cost of debt for Beckham if its marginal tax rate is 35%? Assume that your calculation is made as on Wall Street. 8. RadicalVenOil, Inc., has a cost of equity capital equal to 22.8 percent.
It will be depreciated under MACRS using a 5-year recovery period. At the end of 5 years, the machine can be sold to net $400,000 before taxes. If this machine is acquired, it is anticipated that the following current account changes would result. Cash + $25,000 Accounts Receivable + 120,000 Inventories - 20,000 Accounts Payable + 35,000 Press B – This press is not as sophisticated as press A. It costs $640,000 and requires $20,000 in
1. How much money will Tom and Tricia have in 45 years if they do nothing for the next 10 years, then puts $2400 per year away for the remaining 35 years? 1. How much money will Tom and Tricia have in 45 years if they put $2400 per year away for the next 10 years, then puts nothing additional away for the remaining 35
Time Value of Money Exercises 1. What is the balance in an investment account at the end of 10 years if $5,000 is invested today and the account earns 8% interest compounded annually? What would the value be after 50 years? After 100 years? 2.
2. Based on the following, calculate the costs of buying and of leasing a motor vehicle. Purchase Costs Leasing Costs Down payment $1,500 Security deposit $500 Loan payment $450 for 48 months Lease payment $450 for 36 months Estimated value at End of loan $4,000 End of lease charges $600 Opportunity cost interest rate: 4 percent 3. You can purchase a service contract for all of your major appliances for $180 a year. If the appliances are expected to last for 10 years, and you earn 5 percent on your savings, what would be the future value of the amount you would pay for the service contract?
The bonds mature in 10 years. The firm’s average tax rate is 30% and its marginal tax rate is 34%. b. A new common stock issue that paid a $1.75 dividend last year. The par value of the stock is $15, and earnings per share have grown at a rate of 8% per year.