CHAPTER 2 How to Calculate Present Values Answers to Problem Sets 1. If the discount factor is .507‚ then .507*1.126 = $1 2. 125/139 = .899 3. PV = 374/(1.09)9 = 172.20 4. PV = 432/1.15 + 137/(1.152) + 797/(1.153) = 376 + 104 + 524 = $1‚003 5. FV = 100*1.158 = $305.90 6. NPV = -1‚548 + 138/.09 = -14.67 (cost today plus the present value of the perpetuity) 7. PV = 4/(.14-.04) = $40 8. a. PV = 1/.10 = $10 b. Since the perpetuity
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Chapter 4 15. For discrete compounding‚ to find the EAR‚ we use the equation: EAR = [1 + (APR / m)]m – 1 = .0719‚ or 7.19% EAR = [1 + (.07 / 4)]4 – 1 EAR = [1 + (.16 / 12)]12 – 1 = .1723‚ or 17.23% = .1163‚ or 11.63% EAR = [1 + (.11 / 365)]365 – 1 To find the EAR with continuous compounding‚ we use the equation: EAR = er – 1 EAR = e.12 – 1 = .1275‚ or 12.75% 23. Although the stock and bond accounts have different interest rates‚ we can draw one time line‚ but we need to remember to
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T he Sisyphean Corporation The Sisyphean Corporation is considering investing in a new cane manufacturing machine that has an estimated life of three years. The cost of the machine is $30‚000 and the machine will be depreciated straight line over its three-year life to a residual value of $0. The cane manufacturing machine will result in sales of 2‚000 canes in year 1. Sales are estimated to grow by 10% per year each year through year three. The price per cane that Sisyphean will charge
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e TCH321 – CORPORATE FINANCE MOCK EXAM Time: 1 hour 30 minutes The exam lasts 1 hour and 30 minutes and consists of 5 questions. Approved calculators are permitted. You are not allowed to use Excel. This is a closed book exam. You are NOT permitted to access any other material in either written or electronic form. All numerical answers should be reported to TWO decimal places. To ensure the accuracy of your answer‚ you should perform all intermediate calculations to at least THREE decimal places
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| Corporate Finance2 CreditsBU.231.620.62Thursday 6pm – 9pm‚ 10/18/2012--12/13/2012Fall2‚ 2012Columbia‚ Columbia Center‚ 218 | Instructor Shabnam Mousavi Contact Information Phone Number: (410)234-9450 E-mail Address: shabnam@jhu.edu Office Hours Monday/Thursday 10am-noon Required Text and Learning Materials (1) Berk‚ J. and P. DeMarzo. 2007. Corporate Finance. 2nd Edition. Pearson‚ Addison-Wesley with MyLab access. The ISBN is 0-13-295-040-5. (2) Lecture Notes. The lecture
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Numerical Facts about… …Rain forest population * 63‚000 square miles of Rainforests are being destroyed each year. * Already over half of the world’s tropical forests have been lost. * Every year approximately four billion tons of carbon accumulates in the air each year‚ about 30% of this comes directly from the continued burning of the rainforests. * More than anything else‚ rainforest is destroyed by peasant farmers. However‚ the responsibility for this lies largely with the
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Department of Finance‚ HKUST Spring 2013 Email: Xuewenliu@ust.hk Office hour: 13:30-14:30 Tuesday Assessment: Assignments (12%)‚ Midterm-exam (18%)‚ Projects and presentations (15%)‚ and Final exam (55%) Textbooks: 1. Corporate Finance‚ by J. Beck and P. DeMarzo‚ 2nd edition 2011‚ Pearson Education‚ Inc. Hereafter BD. 2. Financial Markets and Corporate Strategy‚ by M. Grinblatt and S. Titman‚ 2nd edition‚ 2002‚ Irwin McGraw Hill. Hereafter GT. I. Introduction to Corporate Finance 1. Corporations
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Schrödinger’s equation by numerical integration Abstract The aim of this program is to solve Schrödinger’s equation via a numerical method and to compare our results with the analytical result. The harmonic oscillator potential was taken as the potential in the equation. This was used because the solutions to this one dimensional system are well known‚ and an analytic solution is relatively easy to program. The idea is that once we have verified that our numerical approach works for this
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price $40 Market value of firm $400‚000 Number of shares 10‚000 Earnings per share $4 Book net worth $500‚000 Return on investment 8% Pisa has not performed spectacularly to date. However‚ it wishes to issue new shares to obtain $80‚000 to finance expansion into a promising market. Pisa’s financial advisers think a stock issue is a poor choice because‚ among other reasons‚ “sale of stock at a price below book value per share can only depress the stock price and decrease shareholders’ wealth
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Solutions to Chapter 10 Introduction to Risk‚ Return‚ and the Opportunity Cost of Capital capital gain + dividend ($44 − $40) + $2 = = 0.15 = 15.0% initial share price $40 1. Rate of return = Dividend yield = dividend/initial share price = $2/$40 = 0.05 = 5% Capital gains yield = capital gain/initial share price = $4/$40 = 0.10 = 10% 2. Dividend yield = $2/$40 = 0.05 = 5% The dividend yield is unaffected; it is based on the initial price‚ not the final price. Capital gain = $36 – $40
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