Time Value of Money Exercise 1. If you invest $1000 today at an interest rate of 10% per year‚ how much will you have 20 years from now‚ assuming no withdrawals in interim? 2. a. If you invest $100 every year from the next 20 years starting one year from today and you earn interest of 10% per year‚ how much will you have at the end of the 20 years? b. How much must you invest each year if you want to have $50000 at the end of the 20 years? 3. What is the present value of the following
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Net Present Value‚ IRR‚ and the Payback Period Infomercial Entertainment‚ Inc. In the good of days—before cable TV‚ fax machines‚ and multimedia personal computers—the phrase‚"…and now a word from our sponsor…”usually meant just that‚ Television commercials were continued to thirty-and sixty—second messages‚ grouped together to occupy only two or three minutes of viewing time. Occasionally‚ if you stayed up late enough sitting in front of the tube‚ you’d see thirty minute segments on riveting topics
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making a down payment of Rs.1‚50‚000 and remainder in equal instalments of Rs. 1‚50‚000 for six years. What is the rate of interest to the firm? 2. a.Explain the mechanism of calculating the present value of cash flows..What is annuity due? How can you calculate the present and future values of an annuity due? Illustrate b.”The increase in the risk-premium of all stocks‚irrespective of their beta is the same when risk aversion increases” Comment with practical examples 3. a.How leverage is linked
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included in the analysis. In this case initial cost for Blast‚ $500‚000 for test marketing‚ which was conducted in the Detroit area and completed in the previous June was consider as a sunk cost and it will not affect Danforth & Donnalley Laundry future cash flows regardless of whether or not the new branch is built. 2. What would your opinion be as to how to deal with the question of working capital? Working capital management deals with the management of current assets which are inventories
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Hertz purchases the fleet from GM for $325‚000‚ and Hertz is able to issue $200‚000 of five year‚ 8% debt in order to finance the project. All principal will be repaid in one balloon payment at the end of the fifth year. What is the Adjusted Present Value (APV) of the project? 17.1 a. The maximum price that Hertz should be willing to pay for the fleet of cars with all-equity funding is the price that makes the NPV of the transaction equal to zero. NPV = -Purchase Price + PV[(1- TC
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Lovely Professional University‚ Punjab Course Code Course Title Course Planner Lectures FIN302 BASIC FINANCIAL MANAGEMENT 16414::Jyoti Verma Course Category Tutorials Practicals Credits Courses with numerical and conceptual focus 4.0 1.0 0.0 TextBooks Sr No Title Author Edition Year Publisher Name T-1 Essentials of Financial Management I M Pandey 3rd 2012 Vikas Publication Reference Books Sr No Title Author Edition
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Basic Formulas: Present value interest factor of an annuity‚ PVIFA(k‚n) = [ 1 – ( 1 + k )-n ] / k Present value interest factor of a perpetuity‚ PVIFA(k; ∞) = 1 / k Future value interest factor of an annuity‚ FVIFA(k‚n) = [ ( 1 + k )n –1 ] / k Annuities Due‚ payments at start of period‚ PVIFADue(k‚n) = PVIFA(k‚n) * ( 1 + k ) FVIFADue(k‚n) = FVIFA(k‚n) * ( 1 + k ) Where: k is the effective discount rate
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ANNUITY DUE An annuity for which the periodic payments are made at the beginning of each payment interval. The term of an annuity due begins on the date of the first payment interval after the last payment is made. FUTURE VALUE OF ANNUITY DUE 1. Using the Annuity Table * Uses the same table as ordinary annuities but with some modifications. Example : Ferdie Gonzales deposited P6‚000 at the beginning of each month‚ for 2 years at his credit union. If the
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The Charles H. Kellstadt Graduate School of Business DePaul University FIN 555: Financial Management Prof. Randy Fisher Case Study Questions: Ocean Carriers These questions relate to the Ocean Carriers case in your course packet. You can find the data for this case on the course website in a spreadsheet named: Ocean Carriers Exhibits.xls. This case provides the opportunity to make a capital budgeting decision by using discounted cash flow analysis to make an investment and corporate
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that may be asked in the mid-semester exam‚ however it should not be taken as being exhaustive as to the topics that could be included in the exam. Students should therefore not be surprised if other types of questions appear in the exam. 1. $200 invested today and earning 8 per cent per annum compounded semi-annually will grow to what amount at the end of three years? (A) (B) $251.94 (C) $380.75 (D) 2. $158.80 $253.06 Bill plans to fund his individual retirement account
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