compounded annually. After five years‚ her savings account will be worth $5000. Assume she will not make any withdrawals. Given this‚ which one of the following statements is true? A) Samantha deposited more than $5600 this morning. B) The present value of Samantha’s account is $5600 C) Samantha could have deposited less money and still had $5600 in five years if she could have earned 5.5 percent interest. D) Samantha would have had to deposit more money to have $5600 in five years if she could
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purchase of the company. Peabody’s cost of debt was .038. This was calculated by assuming a 40% tax rate and .095 rate on debt (Exhibit 3). There was a .095 interest rate on notes payable due June 30‚ 1998; therefore‚ we assumed the rate of debt at the time of purchase would have been similar. Also‚ Peabody’s cost of equity was .1397. This was calculated by using a risk-free rate of .055‚ which was the rate of the 90-day T-bill in 1968. A beta of 1 was assumed and a .082 market risk premium was used.
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According to Gitman (2009)‚ present value (annuity): = (‚ ) PVA = PMT x (PVIFA11%‚ 30) PVA = $20‚000 x (8.694) PVA = $173‚880 b. How much will you need today as a single amount to provide the fund calculated in part “a” if you earn only 9% per year during the 20 years preceding retirement? $30‚950.64 would be needed today to provide $173‚880 assuming only 9% is earned per year during the 20 years preceding retirement. According to Gitman (2009)‚ present value (single amount): = (‚ ) PV
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Remaining maturity refers to: 6) Generally accepted accounting principles (GAAP) refers to 7) Original maturity refers to: 8) The firm’s assets in the balance sheet refer to: 9) Book value (or Net book value) refers to: 10) The return expected by equity investors is called the __________. 11) Assume that the par value of a bond is $1‚000. Consider a bond where the coupon rate is 9% and the current yield is 10%. Which of the following statements is true? 12) Preferred stock payment obligations are
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(Wealth of Nations‚ 1776) that a free economy driven by market forces and free of government intervention is best. • Keynes suggested (General Theory of Employment‚ Interest‚ and Money‚ 1936) that government intervention is important‚ particularly in times of economic stagnation and inflation. His views had a strong influence on actions taken by President Roosevelt in formulating “The New Deal” of the 1930s. 357 358 Engineering Problem Solving: A Classical Perspective Debate continues today
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reasons: o His age determines the time period wherein he can be productively employed. The time window available to Ben keeps on reducing with age. o Ben is away from formal mode of study for past six years. Being away from study for many years could cause significant difficulty in adapting to the daunting requirements of a typical MBA program. o The higher earning potential after the MBA program could be exploited more productively and for a longer span of time if Ben completes the MBA program at
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increases by a specific multiple‚ the total dollar value of the shares remains the same compared to pre-split amounts‚ because the split did not add any real value. A stock split is usually done by companies that have seen their share price increase to levels that are either too high or are beyond the price levels of similar companies in their sector. The primary motive is to make shares seem more affordable to small investors even though the underlying value of the company has not changed. A stock
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but corporations use 10-year treasuries 33% of the time‚ and also choose 10-30 year treasuries 33% of the time. By looking at the above number I thought using a 10 yeartreasury which currently had a yield of 5.39% was the best option available. K(cost of Equity)=RF+Beta(RM-RF) 5.870-5.39+0.8(6-5.39) Therefore the cost of equity is 5.870% For the dividend discount model the rate of growth is zero. Although (exhibit4) states that the value line forecast of dividend growth from 98-00 to ’04-’06
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million times per week. Wal-Mart operates under 69 different banners in 27 countries. With fiscal year 2012 sales of approximately $444 billion‚ Wal-Mart employs 2.2 million associates worldwide. In 2005 for this case the sales were approximately $285 billion and operated 4‚000 stores worldwide. Valuations Dividend Discount Method (DDM): The DDM is a procedure for valuing the price of a stock by using predicted dividends and discounting them back to present value. The idea is that if the value obtained
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your work where appropriate (leaving the calculations within Excel cells is acceptable). Save the document‚ and submit it in the appropriate week using the Assignment Submission button. Chapter 8 Exercise 1: 1. Basic present value calculations Calculate the present value of the following cash flows‚ rounding to the nearest dollar: A single cash inflow of $12‚000 in five years‚ discounted at a 12% rate of return. 12000/(1.12)^5 = $6‚809 An annual receipt of $16‚000 over the next 12 years‚ discounted
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