at that time? Future Value of Annuity = P (1+i)n – 1 i = $500 (1.05)20 – 1 .05 = $500 (1.653) (0.5) =$500 x (33.065) =$16‚533 Issue B: Mary has been working at the university for 25 years‚ with an excellent record of service. As a result‚ the board wants to reward her with a bonus to her retirement package. They are offering her $75‚000 a year for 20 years‚ starting one year from her retirement date and each year for 19 years after that date. Mary would prefer a one-time payment
Premium Time Time value of money Deposit account
ECONOMICS 102 GOD’S GIFT: LIFE Our mind is free to do what it wants but our heart is a prisoner of our own inhibitions. For so long‚ it was like that. We have gone through a lot of lifeless days and cold nights. Those were the times of our life when our days seemed to be numbered. Its as if we will never glimpse at the rising sun in a beautiful morning again. Every time we open our eyes‚ it looks like we are at the edge of a cliff where from beneath
Premium Meaning of life Human Life
for $20‚000 per year over the next 8 years. Lease payments are to be made at the beginning of each year. Assuming that Lancer leasing company requires a 9% rate of return‚ what is the PV of payments? PV = $120‚663 4. The Mutual Assurance and life Company is offering an insurance policy under either of the following two terms: a) Make a series of 12 payments of $1‚200 at the beginning of each of the next 12 years (first payment being made today) b) Make a single lump-sum payment
Premium Money Compound interest Interest
financial decisions‚ return‚ risk‚ and the firm’s value. 1) Any action taken by the financial manager that increases risk will also increase the required return. True or False 2) In common stock valuation‚ any action taken by the financial manager that increases risk will cause an increase the required return. True or False 3) In common stock valuation‚ any action taken by the financial manager that increases risk will cause an increase in value. True or False 4) An action on the part of
Premium Balance sheet Stock market P/E ratio
investors want a 40 percent rate of return on their investment‚ calculate the venture’s present value. B. Now assume that the Year 6 cash flows are forecasted to be $900‚000 in the stepping stone year and are expected to grow at an 8 percent compound annual rate thereafter. Assuming that the investors still want a 40 percent rate of return on their investment‚ calculate the venture’s present value. C. Now extend Part B one step further. Assume that the required rate of return on
Premium Net present value Rate of return Cash flow
liability. Investors in corporations have limited liability. They can lose their investment‚ but no more. Chapter 2 How to calculate Present values Question 6: Perpetuities An investment costs $1‚548 and pays $138 in perpetuity. If the interest rate is 9%‚ what is the NPV? Answer NPV = −1‚548 + 138/.09 = −14.67 (cost today plus the present value of the perpetuity). Question 7: Growing perpetuities A common stock will pay a cash dividend of $4 next year. After that‚ the dividends
Premium Finance Investment Net present value
OF PRESENT VALUE SO IMPORTANT FOR CORPORATE FINANCE? The importance of concept of present value to the world of corporate finance is that present value calculations are widely used in business and economics to provide a means to compare cash flows at different times. Present Value’s definition and simplistic formula used for normal purchases‚ the concept’s importance to corporate finance and why present value is the very first topic taught in finance classes explain that present value is an essential
Premium Time value of money Net present value Rate of return
MGMT 640 Section 9056‚ Mid-term Exam Fall 2010 This exam consists of 33 multiple-choice questions. Enter your answers on the Answer tab of the Excel spreadsheet that has been provided. (The worksheet tabs are located at the bottom of your worksheet.) Put your calculations on the Calculations tab as evidence of your work. Your calculations will be used as evidence of your independent work only and will not be used for partial credit for incorrect answers. Change the Excel file name to include
Premium Net present value Time value of money Rate of return
1. If you deposit $10‚000 in a bank account that pays 10 percent interest annually‚ how much money will be in your account after 5 years? 2. What is the present value of a security that promises to pay you $5‚000 in 20 years? Assume that you can earn 7 percent if you were to invest in other securities of equal risk. 3. If you deposit money today into an account that pays 6.5 percent interest‚ how long will it take for you to double your money? 4. Your parents are planning to retire in 18
Premium Money Interest rate Time value of money
Case Study Report The Power of Terminal Value ARCADIAN MICROARRAY TECHNOLOGIES‚INC. Contents TOC o 1-3 h z u HYPERLINK l _Toc400235473 1. Introduction PAGEREF _Toc400235473 h 3 HYPERLINK l _Toc400235474 1.1. Object of Transaction PAGEREF _Toc400235474 h 3 HYPERLINK l _Toc400235475 1.2. Buyer Sierra Capital Partners PAGEREF _Toc400235475 h 3 HYPERLINK l _Toc400235476 1.3. Seller Arcadian Microarray Technologies‚ Inc. PAGEREF _Toc400235476 h 3 HYPERLINK l _Toc400235477 2. Methodology Analysis
Premium Discounted cash flow Net present value Cash flow