I need some help on computing rate of return. If I had 400.00 in a 12 year annuity. The rate of return I require is 9%. What annual cash flow from the annuity will provide the required return. I need to understand the formula and how you come to answer.
Write down the formula for determining how much money was borrowed and how to calculate it. If I have the following example : monthly payment is 821.69 for 30 years at 6.5%.
1. Alexis Mantle recently won a lottery and has the option of receiving one of the following three prizes: (1) $64,000 cash immediately, (2) $20,000 cash immediately and six-period annuity of $8,000 beginning one year from today, or (3) a six-period annuity of $13,000 beginning one year from today. Assuming an interest rate of
1 If managers are making decisions to maximize shareholder wealth, then they are primarily concerned with making decisions that should: a. Positively affect profits. b. Increase the market value of the firm's common stock. c. Either increase or have no effect on the value of the fi
You are to receive $12,000 at the end of 5 years. The available yield on investments is 6%. Which table would you use to determine the value of that sum today? Present value of an annuity of $1 Future value of an annuity Present value of $1 Future value of $1
Marcia Stubern is planning for her golden years. She will retire in 20 years, at which time she plans to begin withdrawing $60,000 annually. She is expected to live for 20 years following her retirement. Her financial advisor thinks she can earn 9% annually. How much does she need to invest each year to prepare for her financial
John is saving for his retirement. Today is his 40th birthday. John first started saving when he was 25 years old/ on his 25th birthday; John made the first contribution to his retirement account; he deposited $2,000 into an account which paid 9 percent interest, compounded monthly. Each year on his birthday, John contributes an
Problem: 4-6A (Cash budget) The Sharpe Corporation's projected sales for the first eight months of 2004 are as follows: January $ 90,000 February 120,000 March 135,000 April 240,000 May $300,000 June 270,000 July 225,000 August 150,000 Of Sharpe's sales, 10 percent is for cash, another 60 percent is collected in th
What is the rate of return on an investment of $10,606 if the company will receive $2,000 each year for the next 10 years? (show work)
Problems: 1.Given the following data, solve for the number of years in each case. (Use a financial calculator). Present Value Interest rate Future Value Years $1,200 8% $2,590.71 $16,310 12% $20,459.26 $75,000
I need a little bit of assistance with the attached questions. I have been able to answers others, but need help with these. Chapter 4 4-2 Define and differentiate among the three basic patterns of cash flow: (1) a single amount, (2) an annuity, and (3) a mixed stream. A single amount cash flow refers to an individual,
You want to buy a condo 5 years from now, and you plan to save $3,000 per year, beginning one year from today. You will deposit the money in an account that pays 6% interest. How much will you have just after you make the 5th deposit, 5 years from now?
Janice would like to send her parents on a cruise for their 25th wedding anniversary. She has priced the cruise at $15,000 and she has 5 years to accumulate this money. How much must Janice deposit annually in an account paying 10 percent interest in order to have enough money to send her parents on the cruise?
Please see the attached file. Complete problems 2, 4, 13, 17, 26, 30, 37, 38, & 40 on text pp. 207-211 of Ch. 6. 2. If you require a 9 percent return on your investments, which would you prefer? a. $5,000 today b. $15,000 five years from today c. $1,000 per year for 15 years 4. The Mutual Assurance and Life Company i
You are willing to pay $15,625 to purchase a perpetuity which will pay you and your heirs $1,250 each year, forever. If your required rate of return does not change, how much would you be willing to pay if this were a 20-year, annual payment, ordinary annuity instead of a perpetuity?
We are examining a new project. We expect to sell 500 units per year at $20 net cash flow a piece for the next 10 years. In other words, the annual operating cash flow is projected to be $20 x 500 = $10,000 per year. The relevant discount rate is 20%, and the initial investment is $55,000. a) What is the NPV? b) After the
You are evaluating two different sound mixers. The Jazzmaster costs $45,000, has a three-year life, and costs $5,000 per year to operate. The Discmaster costs $65,000, has a five-year life, and costs $4,000 to operate. The relevant discount rate is 12%. Ignoring depreciation and taxes, compute the EAC for both. Which do you pref
Calculating Annuities Due You want to buy a new sports car from Muscle Motors for $32,000. The contract is in the form of a 72-month annuity due at a 7.75 percent APR (compounded monthly). Your monthly payment will be $? . (Round your answer to 2 decimal places, e.g. 32.16.) Calculating the Number of Periods At 12 perce
10.33 The risk-free rate is 7.6 percent. Potpourri Inc. stock has a beta of 1.7 and an expected return of 16.7 percent. Assume the capital-asset-pricing model holds. 1. What is the expected market risk premium? 2. Magnolia Industries stock has a beta of 0.8. What is the expected return on the Magnolia stock? 3. Suppose you
The corporation projects to pay a dividend of $0.75 next year and then have it grow at 12% for the next 3 years, before growing at 8% indefinitely thereafter. the equity has a required return of 10% in the market. What should the price of the stock be?
Your cost of capital is 11 percent, and here is the offer: You put in $900 per year for the first 11 years (years 1 through 11) and our company will pay you $2500 for the following 22 years (years 12 through 33). All payments will be made at the end of the year. You will live at least 35 more years. Ignoring taxes, should
1. What is the value of a share of a firm's stock when the firm is expected to pay $2.80 per share dividend at the end of each year and the annual discount rate is 7.5 percent? 2. What is the present value of a lease on a warehouse, where the tenants have a lease that goes into perpetuity and have agreed to pay $300 at the en
An employee works at the local hamburger restaurant for 40 years and never earns more than minimum wage, which is $12,000 a year. However, this employee is able to save 6% per year, or $720 per year. Over the 40 year period, the employee's investments average 8% interest per year. How much will the employee have in his or her re
For each case in the table, answer the questions that follow. Case-- Amt. of Annuity-- Int. Rate-- Deposit(yrs)-- A-- $2500-- 8%-- 10-- B-- 500--
Tim Smith is shopping for a used car. He has found one priced at $4,500. The dealer has told Tim that if he can come up with a down payment of $500, the dealer will finance the balance of the price at a 12% annual rate over 2 years (24 months). 1. Assuming that Tim accepts the dealer's offer, what will his monthly (end-of-mon
As winner of a breakfast cereal competition, you can choose one of the following prizes: a. $100,000 now. b. $180,000 at the end of five years. c. $11,400 a year forever. d. $19,000 for each of 10 years. e. $6,500 next year and increasing thereafter by 5 percent a year forever. If the interest rate is 12 percent, which i
Case Allison Boone, M.D. Allison Boone had been practicing medicine for seven years. Her specialty was neurology. She had received her bachelor's degree in chemistry from Kent State University and her M.D. from Washington University in St. Louis. She did her residency at Columbia Presbyterian Hospital in New York. Allison
Lottery winnings to be taken as a lump sum of $112,000 cash or $35,000 plus $6000 for the next 40 years. What issues are considered when weighing the options? You have to consider the PV of the annuity and also FV for the payment over the years, is that an approach to figure out the best option? If you took the sum of $112,
Today is Archie's 50th birthday and his retirement account totals $237,000. He plans to retire in 12 years and is confident that his nest egg will earn 8% annually between now and that time. When he retires, Archie wants to purchase a 20-year annuity from the Gold Star Insurance Company. The annuity carries an interest rate o
How does an annuity due differ from an ordinary annuity?