Get college assignment help at uniessay writers Brilabkeng d currendly has the loloustng coplel struche De4 00 olelanding bond that pays anouolly 9 coupon rale oilh an annual before tax yield to maheriky of
13. Creating an amortization schedule Aa Aa Ian loaned his friend $25,000 to start a new business. He considers this loan to be an investment, and therefore requires his friend to pay him an interest rate of 10% on the loan. He also expects his friend to pay back the loan over the next four years by making annual payments at the end of each year. Ian texted and asked that you help him calculate the annual payments that he should expect to receive so that he can recover his initial investment and earn the agreed-upon 10% on his investment Calculate the annual payment and complete the following capital recovery schedule: Beginning Principal Interest Paid Payment Paid Year Amount Ending Balance $25,000.00 1 7 3 $0.00 4
12. Mortgage payments Aa Aa Mortgages, loans taken to purchase a property, involve regular payments at fixed intervals and are treated as reverse annuities. Mortgages are the reverse of annuities, because you get a lump-sum amount as a loan in the beginning, and then you make monthly payments to the lender. You’ve decided to buy a house that is valued at $1 million. You have $500,000 to use as a down payment on the house, and want to take out a mortgage for the remainder of the purchase price. Your bank has approved your $500,000 mortgage, and is offering a standard 30-year mortgage at a 10% fixed nominal interest rate (called the loan’s annual percentage rate or APR). Under this loan proposal, your mortgage payment will be per month. (Note: Round the final value of any interest rate used to four decimal places.) Your friends suggest that you take a 15-year mortgage, because a 30-year mortgage is too long and you will pay a lot of money on interest. If your bank approves a 15-year, $500,000 loan at a fixed nominal interest rate of 10% (APR), then the difference in the monthly payment of the 15-year mortgage and 30-year mortgage will be ? (Note: Round the final value of any interest rate used to four decimal places.) It is likely that you won’t like the prospect of paying more money each month, but if you do take out a 15-year mortgage, you will make far fewer payments and will pay a lot less in interest. How much more total interest will you pay over the life of the loan if you take out a 30-year mortgage instead of a 15-year mortgage? $722,695.25 $612,453.60 $783,940.61 $845,185.97 Which of the following statements is not true about mortgages? Mortgages are examples of amortized loans. O The ending balance of an amortized loan contract will be zero. If the payment is less than the interest due, the ending balance of the loan will decrease. Every payment made toward an amortized loan consists of two parts-interest and repayment of principal
2. Future value Aa Aa The principal of the time value of money is probably the single most important concept in financial management. One of the most frequently encountered applications involves the calculation of a future value. The process for converting present values into future values is called compounding This process requires knowledge of the values of three of four time-value-of-money variables. Which of the following is not one of these variables? The interest rate (I) that could be earned by invested funds O The present value (PV) of the amount invested O The inflation rate indicating the change in average prices O The duration of the investment (N) All other things being equal, the numerical difference between present and a future value corresponds to the a amount of interest earned during the deposit or investment period. Each line on the following graph corresponds to or 18%. Identify the interest rate that corresponds with each line. an interest rate: 0%, 9%, VALUE (Dollars) A PM 7 8 0 1 2 3 5 6 9 10 TIME [Years) Line A Line C 0% Line B: 0% 0%
Chapter Review 05 – Time Value of Money Investments and loans base their interest calculations on one of two possible methods: the simple interest and the compound interest methods. Both methods apply three variables-the amount of principal, the interest rate, and the investment or deposit period-to the amount deposited or invested in order to compute the amount of interest. However, the two methods differ in their relationship between the variables. Assume that the variables I, N, and PV represent the interest rate, investment or deposit period, and present value of the amount deposited or invested, respectively. Which equation best represents the calculation of a future value (FV) using: Compound interest? Simple interest? PV(PV x I x N) O FV PV (PV x I x N) FV PV (PV x I x N) FV PV (1 x I x N) FV FV PV x (1 I)N O FV PV (1 I)N Identify whether the following statements about the simple and compound interest methods are true or false. False Statement True All other factors being equal, both the simple interest and the compound interest methods will accrue the same amount of earned interest by the end of the first year. After the end of the second year and all other factors remaining equal, a future value based on compound interest will never exceed the future value based on simple interest. The process of earning compound interest allows a depositor or investor to earn interest on any interest earned in prior periods. Nicholai is willing to invest $35,000 for eight years, and is an economically rational investor. He has identified three investment alternatives (X, Y, and z) that vary in their method of calculating interest and in the annual interest rate offered. Since he can only make one investment during the eight-year investment period, complete the following table and indicate whether Nicholai should invest in each of the investments. Note: When calculating each investment’s future value, assume that all interest is earned annually. The final value should be rounded to the nearest whole dollar. Make this investment? Investment Interest Rate and Method Expected Future Value Yes No 11% compound interest $80,659 X 13% compound interest $93,046 Y $71,400 13% simple interest 7
This morning you purchased a stock that just paid an annual dividend of $3.30 per share. You require return of 9.6 percent and the dividend will increase at an annual growth rate of 4.2 percent. If you sell this stock in three years, what will your capital gain be? $2.67 zing $6.28 $4.20 $10.93 $8.37
A project with an initial cost of $53,640 is expected to generate annual cash flows of $17,790 for the next 5 years. What is the project’s internal rate of return? 17.67% 21.26% 21.81% 19.63% 18.65% 2019 McGraw-Hill Education, All rights reserved
Q.9 (30 Points) On April 1* 2014, AqcuirerCo acquired TargetCo’s 100% shares. The M
Suppose you purchased you first house 2 years ago and took out a mortgage for $160,000 with a 6.25% interest rate. The mortgage is a 30 year loan with monthly payments. Today you can refinance the loan at a 5.50% interest rate for a fixed fee of $5,000. Assume that you would only refinance enough to repay the old loan and the cost of refinancing. A – How much would you still owe on the loan after 2 years? Hint: Utilize the CUMPRINC formula here! Balance of old loan today B-Calculate the amount of the new loan and monthly payments of each loan: Monthly Payments Total Loan Periods Life (In Years) Cost Annual Rate Amount Paid Initial Loan 6.25% 30 160,000.00 24 S 5,000 Refinancing 5.50% 30 0 C-Would you refinance today? Old Loan New Loan PV (of monthly payments) NPV of Refinancing Refinance? D-Now, consider you are at the end of year 2, as is the case above, and you expect to move in 4 years time, would you want to refinance? Year Months Time Till Move 48 4 Old Loan New Loan Loan Balance at Move PV at move (consider balance and monthly payments) NPV of Refinancing Refinance?
A financial institution has the following market value balance sheet structure: Liabilities and Equity Assets 2,300 Certificate of deposit 10,100 Equity $12,400 Total liabilities and equity Cash $11,300 Bond 1,100 $12,400 Total assets a. The bond has a 10-year maturity, a fixed-rate coupon of 12 percent paid at the end of each year, and a par value of $10,100. The certificate of deposit has a 1-year maturity and a 7 percent fixed rate of interest. The Fl expects no additional asset growth. What will be the net interest income (NII) at the end of the first year? (Note: Net interest income equals interest income minus interest expense.) b. If at the end of year 1 market interest rates have increased 100 basis points (1 percent), what will be the net interest income for the second year? Is the change in NIIl caused by reinvestment risk or refinancing risk? c. Assuming that market interest rates increase 1 percent, the bond will have a value of $9,582 at the end of year 1. What will be the market value of the equity for the FI? Assume that all of the NII in part (a) is used to cover operating expenses or is distributed as dividends. d. If market interest rates had decreased 100 basis points by the end of year 1, would the market value of equity be higher or lower than $1,100? e. What factors have caused the changes in operating performance and market value for this FI? Complete this question by entering your answers in the tabs below. Required A Required E Required B Required C Required D If market interest rates had decreased 100 basis points by the end of year 1, would the market value of equity be higher or lower than $1,100? (Negative amounts should be indicated by a minus sign.) higher because the value of the bond would be The market value of the equity would be higher remain unchanged and the value of the CD would
Get college assignment help at uniessay writers You are the CFO of Termination, Inc. Your company has 40 employees, each earning $40,000 per year. Employee salaries grow at 4% per year. Starting from next year, and every second year thereafter, eight employees retire, and no new employees are recruited. Your company has in place a retirement plan that entitles retired workers to an annual pension which is equal to their annual salary at the moment of retirement. Life expectancy is 20 years after retirement, and the annual pension is paid at year-end. The return on investment is 10% per year (Use 10% as the interest rate for this problem). What is the total present value of your pension liabilities now?
Dell Ltd is considering replacing the new one will cost $70,000. The new machine will be depreciated prime cost to zero over its 5-year life. It wil probably be worth about $15,000 after 5 years an old machine with a new one. The old one cost $100,000; The old computer is being depreciated at a rate of $5,000 per year. It wi be completely written off in 5 years. If Dell does not replace it now, it will have to replace it in 5 years. Dell can sell it now for $55,000. In five years, it will probably be worth nothing. The new machine will save $10,000 per year in operating costs. The tax rate is 30 per cent, tax is paid in the year of income Dell Ltd has several classes of outstand bonds, and the average yield is 8%. Its beta is 1.3, historical risk premium is 7.94%, and the treasury yield is 5% If Dell’s capital structure is 40% debt and 60% equity, should Dell Ltd purchase the new computer? Explain your answer
48. An asset with an original cost of $100,000 and a current book value of $20,000 is sold for $50,000 as part of a capital budgeting project. The company has a tax rate of 30 %. This transaction will have what impact on the project’s initial outlay? a. reduce it by $6,000 b. reduce it by $15,000 c reduce it by $20,000 d. reduce it by $50,000
from every other wtoee Resal clothing soes am meampe of what marken srcure? A) perfect competitio B) monopolistic competiaion Coligopoly D) monopoly 24) In monopolistic competition, frs can have some market power A) by virtue of size alone B) by producing differeneianod producs C) because of barriers to entry into D) because of barricrs to exit from the industry ledestry 25) The feature that distingsishes monopolistic competition from perfect competition in ta monopolistically competitive fims are A) large relative to the market B) price takers C) able to block the entrry of other fims D) able to differentiate their products. 26) In a monopolistically competitive industry A) fimms are large relative to the total market B) firms are small relative to the total market Cy firms can be either laree or small relative to the total market D) there is only one firm. 27) Compared to a perfectly competitive fiem, the demand schedule of a monopolistically competitive firm faces is A) more price elastic B) less price elastic. C) perfectly price elastic D) perfectly price inelastic. 28) A profit-maximizing firm in a monopolistically competitive market structure behaves much like a A) perfectly competitive firm B) monopolistic firm C) dominant firm D) Cournot duopolist in the short run. 29) A monopolistically competitive firm produces where A) marginal revenue equals price. B) its marginal revenue curve lies above its demand curve. C) its marginal revenue curve intersects the quantity axis. D) marginal revenue equals marginal cost. 30) If P> ATC, then a profit maximizing, monopolistically competitive firm earns economic profits A) positive B) negative
QUESTION 3 10 marks You are considering the purchase of a new automated CNC machining centre for your company’s manufacturing division. The required capital is $3,300,000. The planned life of this machine is estimated at 1 years, after which the salvage value will be $450,000. You have calculated that this machining centre will enable the machining of precision components 24 hours per day (thus increasing gross revenue by $650,000 annually) and more efficiently (by reducing annual labor costs by $180,000). The prime-lending rate is currently 7.5%. Inflation is running at 1.0 % . aksan Figure 3: Typical Computer Numerically Controlled (CNC) machining centre Your tasks Calculate the discounted payback period for this proposal, taking account of the ‘time-value of money. All financial estimates are in Australian dollars 3.1 8 marks 3.2a Explain why the caleulation does not depend on whether your company uses its own liquid assets to fund the project, or raises the capital by borrowing. 3.2b Recommend whether, in your opinion, the new automated CNC machining centre development should proceed. mark 3.2c State any assumptions you have made or additional information you require in order to answer this question more fully (i.e. if you were working as a professional consulting engineer preparing a briefing paper) I mark Definitions that may assist p.w.f. “present worth factor” P S (1 r c.r.f.”capital recovery factor” cRrx(1 r) P (1 r)-1 r real interest rate n number of years A”annual cost equivalent” (present worth terms) (-pV) x c I installed cost (present worth terms) V salvage value (a future amount) P is the present value of S, n years in the future R annual return of project (present worth terms) Total Project Cost (present worth terms), T nxA DPBP-“discounted payback period” =T/R ( years)
ASSIGNMENT 1 Burton is a small manufacturing company that makes furniture. They are considering a project where they will make special metal ornaments; this is considered to be in the normal area of its business. This will involve the company buying a new piece of equipment, the capital costs of which will be $400,000; there will also be an extra $50,000 of installation costs which can be expensed straight away. This piece of equipment will replace an old machine which has a book value of $50,000 and one year to go before it will have been depreciated to zero. The new equipment will be depreciated straight line to zero over five years with no salvage value at the end of its life. If the project is undertaken the old equipment will be sold for $90,000 The ornaments will retail for $12 each and will cost a total of $8 each to get to the market. In the final two years of the five-year project, it is expected that the costs will rise to $9 and $10 respectively. At the start of the project, it is expected that there will be $40,000 of stock required. At the same time accounts receivables will be $50,000 and accounts payable of $25,000. These levels will be maintained until the end of the project. The company expects to sell 80,000 units in the first year, rising to 100,000 in year 2 and 120,000 in year 3, before falling back to 100,000 for each of years 4 and 5. The company expects to incur an extra $50,000 in marketing costs in the first year, followed by $40,000 a year thereafter. The project will also incur $40,000 of overhead costs from the parent company. The survey cost of $30,000 will be paid in year 1 of the project. Two managers from the parent company will come and work on the project; their current salaries are $50,000 each and the parent company will have to hire two new managers to fill the vacated positions. The company expects to start two new managers at a salary of $40,000 each. The company is funded with $16 million of equity and $6 million of debt. The recent dividend growth rate at the company has been 6 %. The equity beta is 1.5 and the debt beta is 0.25. The company faces a tax rate of 30%. The risk free rate of interest is 4.6% and the stock market return is 10.6%. Required: (a) Calculate the cost of capital for the project (b) Lay out the cash flows for the project, with explanations as to why you have included and excluded certain cash flows. Calculate the NPV. Should the project be accepted? (c) Calculate the internal rate of return
Document3 References Mailings Review View A A AaBbCcDdEe AaBbCcDdEe AaBbCcD AaBl 2 Normal No Spacing Heading 1 He This Setup pertains to the next four questions: You are analyzing the beta of HP and have divided the company into four business groups. Currently HP has 4 billion of debt outstanding (assume equally distributed among divisions $1B each) and subject to % 36 corporate tax; betas and market values for each group are: Business Group Market Value Unlevered Beta Mainframes 2.25 0.74 Personal computers 2.25 1.4 Software 3.125 2 Printers 3.375 1.3 What is the unlevered beta of HP: a. 0.83 b. 1 C. 1.29 d. 1.37 e. 1.42 What is the levered beta of HP: a. 1.1 b. 2.05 c. 1.97 d. 2.51 e. 2.11 h (US) AN 11
15. Consider the following data for a particular sample period: Market portfolio M Portfolio A 13% 10% Mean return 1.2 1.00 Beta 30% 20% Standard deviation The interest rate during the period is 2%. a) Calculate the performance measures for portfolio A and the market: Sharpe ratio, Jensen’s alpha, and Treynor measure (5 marks) b) By which measures did portfolio A outperform the market? Explain your argument (5 marks)
Intro You took out a 30-year fixed-rate mortgage to buy a house. The interest rate is 7.2% (APR) and you have to pay $1,730 per month. B Attempt 1/20 for 10 pts Part 1 What is the original mortgage amount? No decimals Submit
You are analyzing Tiffany, an upscale retailer and find that the regression estimate of the firm’s beta is 1; the standard error for the beta estimate is 0.25. The company has a debt/assets ratio of 20 % and is subject to 40% tax rate. Assume also that risk free rate is 6% and the market risk premium is 5.5%. 1-what is the 95% confidence interval for the estimated beta? -0.25 to 2.25 a- b- 0 to 2 0.25 to 1.75 C- d- 0.5 to 1.5 0.75 to 1.25 e- 2- Assume Tiffany is rated BBB and that the default spread for BBB rated firm is 1 % above the risk free, what is the company’s cost of capital? 8.70% a- b- 9,50% c- 10.60% d- 11.71% e- 12.22% English (US)
Question 74 of 75 Holly is a small business owner whose income is reported on Schedule C. She placed her 2016 Honda Accord into service when she purchased it on January 1, 2018 for $24,000. She did not claim any §179 expense, but she did claim bonus depreciation. In 2018, she drove her vehicle 9,600 miles for business, 5,200 commuting miles, and a total of 18,000. What is Holly’s depreciation for the car in 2018? $9,600 24k.? of O $12,000 O $18,000 O $24,000 Mark for follow up
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