10% risk free rate when calculating its cost of capital. This is the average of the 20 year bond annualized yield to maturity (on August 31‚ 1997) and the long term historical average annual return (from 1929 1996). The long term bond return was used because it provides an accurate average annual return since it reflects many years. The 20 year bond as of August 31‚ 1997 was used because it is the current yield to maturity. They were averaged in order to get a rate that would reflect current
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Table of Contents Introduction 2 Question 1 2 Part 1 2 Part 2 3 Question 2 3 Method 1 – Using an Option Pricing Model 3 Method 2 – Using the Projected Financial Performances 5 Comparison 6 Question 3 7 Advantages 7 1. Time Value 7 2. Capture Value of Options 7 Disadvantages 7 1. Assumptions Made 7 2. Tax Effect 7 3. Historical Data 8 4. Selection Bias 8 Further Assistance/Data Required 8 Question 4 9 Problems/Disagreement 9 Contractual Terms and Provisions
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of an annuity due? Illustrate Ans. Money has time value: e.g. Rs 1‚000 received today is not the same after year Present value of cash flow: It shows the value of expected amount at current value. Discount rate = Inflation rate + required rate of return + risk free premium rate Details required
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Chapter 9‚ Problem 17 Jack Hammer invests in a stock that will pay dividends of $2.00 at the end of the first year; $2.20 at the end of the second year; and $2.40 at the end of the third year. Also‚ he believes that at the end of the third year he will be able to sell the stock for $33. What is the present value of all future benefits if a discount rate of 11 percent is applied? (Round all values to two places to the right of the decimal point.) Present value of a single amount PV = FV x PVIF
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establishing empirical estimates of such a benchmark market risk premium. As a result‚ the typical advice to practitioners is to estimate the market risk premium based on historical realizations of share and bond returns In this paper‚ we present estimates of shareholder required rates of return and risk premia which are derived using forward-looking analysts’ growth forecasts. We update‚ through 1991‚ earlier work which‚ due to data availability‚ was restricted to the period 1982-1984 (Harris [12]).
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draft of the investment setup: With the information collected in the first step‚ to set reasonable assumptions‚ including rents‚ vacancy‚ renovation cost‚ operating expenses‚ etc and calculate the future cash flow‚ potential profits and expected return. To use scenario analysis‚ if necessary‚ and change the assumptions under different market situations to get a whole picture of future possibilities. Planning for own equity base and making an investigation for the mortgage market: To make
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optimal combination of inputs to minimize the cost of production Returns to scale- Refers to the degree by which output changes as a result of a given change in the quantity of all inputs used in production. If quantity of all inputs is increased by a given proportion‚ we have constant returns to scale‚ increasing returns to scale and decreasing returns to scale. Application of the concept Constant returns Increasing returns to scale Measures adopted to overcome the problem- Small is
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} else { parent->right = curr->left; delete curr; } } return; } //We’re looking at a leaf node if( curr->left == NULL && curr->right == NULL) { if(parent->left == curr) parent->left = NULL; else parent->right = NULL; delete curr; return; } //Node with 2 children // replace node with smallest value in right subtree if (curr->left != NULL && curr->right
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Definition of financial terms Dino Scott FIN/370 April 6‚ 2011 Curtis Keith Definition of financial terms Finance concerns the management‚ maintenance‚ and creation of economic value or wealth (Keown‚ Martin‚ Petty‚ & Scott‚ Jr.‚ 2005‚ p. 4). Efficient market is the theory that market prices reflect the knowledge and expectations of all investors (Downes & Goodman‚ 2010). Primary market is the market for new issues of securities. A market is primary if the proceeds of sales go to the
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LINEAR PROGRAMMING FORMULATION PROBLEMS AND SOLUTIONS 7-14 The Electrocomp Corporation manufactures two electrical products: air conditioners and large fans. The assembly process for each is similar in that both require a certain amount of wiring and drilling. Each air conditioner takes 3 hours of wiring and 2 hours of drilling. Each fan must go through 2 hours of wiring and 1 hour of drilling. During the next production period‚ 240 hours of wiring time are available and up to 140 hours of drilling
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