Homework Answers
Pay = cash flow year 1 / required rate - growth rate
Pay = 2000 / 0.1 - 0.05
Pay = 2000 / 0.05
Pay = $40,000
You are willing to pay $40,000
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Section Di vill make yearly payments forever. Question Two: You have an opportunity to invest in...
Question Two: You have an opportunity to invest in a deal that will make yearly payments...
Question Two: You have an opportunity to invest in a deal that will make yearly payments forever. These payments will grow at a rate of 5% per year. You will receive your first payment of $2000 one year from today. Due to the risks associated with this investment, you will require a return of 10%. How much are you willing to pay for this deal today? (KN1:3.5 marks)
Question Two: You have an opportunity to invest in a deal that will make yearly payments...
Question Two: You have an opportunity to invest in a deal that will make yearly payments forever. These payments will grow at a rate of 5% per year. You will receive your first payment of $2000 one year from today. Due to the risks associated with this investment, you will require a return of 10%. How much are you willing to pay for this deal today? (KN1:3.5 marks)
You have the opportunity to invest $5,000 today and receive risk free payments of $4,000 at...
You have the opportunity to invest $5,000 today and receive risk free payments of $4,000 at the end of each of the next three years. Assume that you can borrow and lend at a risk free rate of 12% per year, compounded annually. The internal rate of return on this investment opportunity is 60.74%. True or False (Circle one). If you take this project, after you receive the final payment of $4,000 at time t=3 you will have earned an...
Let's say you have the opportunity to invest in a project that will require you to...
Let's say you have the opportunity to invest in a project that will require you to invest $100,000 today. You will receive positive after tax cash flows of $20,000 at the end of each of the next six years. At the end of that sixth year, you will also receive a terminal value payment of $15,000 after tax. Your cost of capital is 8.0%. What is the NPV of the project? Round to the nearest $ and use the $...
1. Time Value of Money You have been offered a unique investment opportunity. If you invest...
1. Time Value of Money You have been offered a unique investment opportunity. If you invest $20,000 today, you will receive $1000 one year from now, $3000 two years from now, and $20,000 ten years from now. a. What is the NPV of the investment opportunity if the interest rate is 12% per year? Should you take the opportunity? b. What is the NPV of the investment opportunity if the interest rate is 2% per year? Should you take the...
You have the opportunity to invest in several annuities. Which of the following 10-year annuities has...
You have the opportunity to invest in several annuities. Which of the following 10-year annuities has the greatest present value (PV)? Assume that all annuities earn the same positive interest rate. An annuity that pays $1,000 at the end of each year O An annuity that pays $500 at the end of every six months O An annuity that pays $1,000 at the beginning of each year O An annuity that pays $500 at the beginning of every six months...
Problem 8-6 You have been offered a unique investment opportunity. If you invest $10,000 today, you...
Problem 8-6 You have been offered a unique investment opportunity. If you invest $10,000 today, you will receive $500 one year from now, $1,500 two years from now, and $10,000 ten years from now. Complete the steps below using cell references to given data or previous calculations. In some cases, a simple cell reference is all you need. To copy/paste a formula across a row or down a column, an absolute cell reference or a mixed cell reference may be...
Problem 8-6 You have been offered a unique investment opportunity. If you invest $10,000 today, you...
Problem 8-6 You have been offered a unique investment opportunity. If you invest $10,000 today, you will receive $500 one year from now, $1,500 two years from now, and $10,000 ten years from now. Complete the steps below using cell references to given data or previous calculations. In some cases, a simple cell reference is all you need. To copy/paste a formula across a row or down a column, an absolute cell reference or a mixed cell reference may be...
Matric Number: Section: Question 2: (20 marks) You are evaluating a lease that offers annual payments...
Matric Number: Section: Question 2: (20 marks) You are evaluating a lease that offers annual payments of $17.000 for five years. Under this case you are responsible for maintenance and insurance, total cost of $2.500 per year. At the end of the lease you can purchase the asset for $5,000. All payments and expenses are paid at the end on the year. Alternatively, you can obtain a $60,000 five year loan to purchase the asset. This loan, calculated on a...
You will receive 100 British bonds that pay interest forever. The amount of annual interest payments...
You will receive 100 British bonds that pay interest forever. The amount of annual interest payments that you we ece ve is S5.000. If you could invest yOur money at 4.25%, how much are these bonds worth today? O A $55,000 B. $197,250 C. $250,000 O D. $117.647 ? E. $64,480 are considering the purchase of XYZ Company's common stock which will pay a $1.00 per share dividend one year from the date of purchase. The divid end is expected...
Question Two: You have an opportunity to invest in a deal that will make yearly payments forever. These payments will grow at a rate of 5% per year. You will receive your first payment of $2000 one year from today. Due to the risks associated with this investment, you will require a return of 10%. How much are you willing to pay for this deal today? (KN1:3.5 marks)
Question Two: You have an opportunity to invest in a deal that will make yearly payments forever. These payments will grow at a rate of 5% per year. You will receive your first payment of $2000 one year from today. Due to the risks associated with this investment, you will require a return of 10%. How much are you willing to pay for this deal today? (KN1:3.5 marks)
1. Time Value of Money You have been offered a unique investment opportunity. If you invest $20,000 today, you will receive $1000 one year from now, $3000 two years from now, and $20,000 ten years from now. a. What is the NPV of the investment opportunity if the interest rate is 12% per year? Should you take the opportunity? b. What is the NPV of the investment opportunity if the interest rate is 2% per year? Should you take the...
You have the opportunity to invest in several annuities. Which of the following 10-year annuities has the greatest present value (PV)? Assume that all annuities earn the same positive interest rate. An annuity that pays $1,000 at the end of each year O An annuity that pays $500 at the end of every six months O An annuity that pays $1,000 at the beginning of each year O An annuity that pays $500 at the beginning of every six months...
Problem 8-6 You have been offered a unique investment opportunity. If you invest $10,000 today, you will receive $500 one year from now, $1,500 two years from now, and $10,000 ten years from now. Complete the steps below using cell references to given data or previous calculations. In some cases, a simple cell reference is all you need. To copy/paste a formula across a row or down a column, an absolute cell reference or a mixed cell reference may be...
Problem 8-6 You have been offered a unique investment opportunity. If you invest $10,000 today, you will receive $500 one year from now, $1,500 two years from now, and $10,000 ten years from now. Complete the steps below using cell references to given data or previous calculations. In some cases, a simple cell reference is all you need. To copy/paste a formula across a row or down a column, an absolute cell reference or a mixed cell reference may be...
Matric Number: Section: Question 2: (20 marks) You are evaluating a lease that offers annual payments of $17.000 for five years. Under this case you are responsible for maintenance and insurance, total cost of $2.500 per year. At the end of the lease you can purchase the asset for $5,000. All payments and expenses are paid at the end on the year. Alternatively, you can obtain a $60,000 five year loan to purchase the asset. This loan, calculated on a...
You will receive 100 British bonds that pay interest forever. The amount of annual interest payments that you we ece ve is S5.000. If you could invest yOur money at 4.25%, how much are these bonds worth today? O A $55,000 B. $197,250 C. $250,000 O D. $117.647 ? E. $64,480 are considering the purchase of XYZ Company's common stock which will pay a $1.00 per share dividend one year from the date of purchase. The divid end is expected...
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