In calculating insurance premiums, the actuarially fair insurance premium is the premium that results in a...
In calculating insurance premiums, the actuarially fair insurance premium is the premium that results in a zero NPV for both the insured and the insurer. As such, the present value of the expected loss is the actuarially fair insurance premium. Suppose your company wants to insure a building worth $390 million. The probability of loss is 1.29 percent in one year, and the relevant discount rate is 3.1 percent. a. What is the actuarially fair insurance premium? (Do not round...
In calculating insurance premiums, the actuarially fair insurance premium is the premium that results in a zero NPV for both the insured and the insurer. As such, the present value of the expected loss is the actuarially fair insurance premium. Suppose your company wants to insure a building worth $600 million. The probability of loss is 1.31 percent in one year, and the relevant discount rate is 4.2 percent. a. What is the actuarially fair insurance premium? (Do not round...
In calculating insurance premiums, the actuarially fair insurance premium is the premium that results in a zero NPV for both the insured and the insurer. As such, the present value of the expected loss is the actuarially fair insurance premium. Suppose your company wants to insure a building worth $630 million. The probability of loss is 1.43 percent in one year, and the relevant discount rate is 4.6 percent. a. What is the actuarially fair insurance premium? (Enter your...
er 23 for Credit Question 3 (of 3) value: 33.34 points In calculating insurance premiums, the actuarially fair insurance premium is the premium that results in a zero NPV for both the insured and the insurer. As such, the present value of the expected loss is the actuarially fair insurance premium. Suppose your company wants to insure a building worth $420 million. The probability of loss is 1.41 percent in one year, and the relevant discount rate is 3.5 percent....
In calculating insurance premiums, the actuarially fair insurance premium is the premium that results in a zero NPV for both the insured and the insurer. As such, the present value of the expected loss is the actuarially fair insurance premium. Suppose your company wants to insure a building worth $245 million. The probability of loss is 1.25 percent in one year, and the relevant discount rate is 4 percent. a. What is the actuarially fair insurance premium? (Do not round...
Breckinridger Corp. has a debt-equity ratio of .80. The company is considering a new plant that will cost $115 million to build. When the company issues new equity, it incurs a flotation cost of 8.5 percent. The flotation cost on new debt is 4 percent. a. What is the initial cost of the plant if the company raises all equity externally? (Do not round intermediate calculations and enter your answer in dollars, not millions of dollars, rounded to the nearest...
During the year, the Senbet Discount Tire Company had gross sales of $1.07 million. The company’s cost of goods sold and selling expenses were $576,000 and $229,000, respectively. The company also had notes payable of $680,000. These notes carried an interest rate of 4 percent. Depreciation was $106,000. The tax rate was 21 percent. a. What was the company’s net income? (Do not round intermediate calculations. Enter your answer in dollars, not millions of dollars, rounded to the nearest whole...
During the year, the Senbet Discount Tire Company had gross sales of $1.2 million. The company’s cost of goods sold and selling expenses were $589,000 and $242,000, respectively. The company also had notes payable of $810,000. These notes carried an interest rate of 5 percent. Depreciation was $119,000. The tax rate was 24 percent. a. What was the company’s net income? (Do not round intermediate calculations. Enter your answer in dollars, not millions of dollars, rounded to the nearest whole...
Problem 13-14 Calculating Flotation Costs Suppose your company needs $12 million to build a new assembly line. Your target debt-equity ratio is .5. The flotation cost for new equity is 12 percent and the flotation cost for debt is 9 percent. Your boss has decided to fund the project by borrowing money because the flotation costs are lower and the needed funds are relatively small. a. What is your company’s weighted average flotation cost, assuming all equity is raised externally?...
During the year, the Senbet Discount Tire Company had gross sales of $1.23 million. The company's cost of goods sold and selling expenses were $592,000 and $245,000, respectively. The company also had notes payable of $840,000. These notes carried an interest rate of 4 percent. Depreciation was $122,000. The tax rate was 22 percent. a. What was the company's net income? (Do not round intermediate calculations. Enter your answer in dollars, not millions of dollars, rounded to the nearest whole...