Assume that the nominal after-tax net return for year 1: $45, year 2: $47, year 3: $49. The after tax risk adjusted discount rate is 6%, the growth rate is 3%, and the inflation rate is 4%. What is the present value of the after-tax net return? O $125.42 O $134.62 O $158.47 None of the answers are correct
Q: . Magnum Electronics Company expects a demand of 20,000 units per year for a special-purpose…
A: Net Present Value or NPV refers to the capital budgeting techniques used to evaluate the…
Q: Assume that you are a consultant to Morton Inc., and you have been provided with the following data:…
A: Current Dividend = d0 = $1.4Current Price of Stock = p0 = $36Growth Rate = g = 4.8%
Q: Assume that a car costs 419,900 in Mexican pesos (MXN). The same car in the United States is sold…
A: Arbitrage is a financial strategy centered on exploiting price discrepancies in assets across…
Q: Magnum Headache, Inc., is unlevered, with equity valued at $7 million and with 3.5 million shares…
A: Unlevered and levered firm data UnleveredLeveredNumber of shares35000002500000Debt2000000Annual…
Q: A $1,000 Treasury inflation-protected security is currently selling for $965 and carries a coupon…
A: Treasury Inflation protected security also called as TIPS are offered by the government of the US.…
Q: When a person claims to have been deceived into signing a negotiable instrument by being told it is…
A: Deception on the signing of a negotiable instrument refers to a situation where a person…
Q: Gangnam Corp is a South Korea-based music entertainment company, but is interested in launching a…
A: Cost of equity:The cost of equity refers to the return a company requires to persuade investors to…
Q: A project has the following cash flows: Year ON 3 2 Project Cash Flows -$5,987.00 $2,456.00…
A: YearCash flow0-$5,987.001$2,456.002$2,456.003$2,456.004$2,456.00Cost of capital = 10%
Q: Retlaw Corporation (RC) manufactures time-series photographic equipment. It is currently at its…
A: First we will have to calculate the cost of the project after considering the flotation costs. Once…
Q: You find the following corporate bond quotes. To calculate the number of years until maturity,…
A: Here,Settlement Date15-Jan-22Maturity Date15-Jan-38Coupon Rate5.80%Par Value $ 2,000.00Last…
Q: Based on market values, Gubler's Gym has an equity multiplier of 168 times. Shareholders require a…
A: The equity multiplier ratio is a useful tool for evaluating a company's financial leverage or…
Q: a. Estimate the Portfolio Beta. (Remember you must get the weights first) •MXA b. Assume that the…
A: CAPM or capital asset pricing model is used to calculate the required rate of return from the stock…
Q: You purchased an annual interest coupon bond one year ago that now has 18 years remaining until…
A: A bond refers to an instrument that is used to raise debt capital for the issuing company from…
Q: You deposit $3,500 at the end of the year (k = 0) into an account that pays interest at a rate of 7%…
A: Initial deposit = $3,500Interest rate in 1st year - 7% (Compounded annually)After 1 year, interest…
Q: Which one of the following statements is correct if a firm has a receivables turnover of 10? It…
A: The objective of the question is to understand the meaning of a firm's receivables turnover ratio of…
Q: In order to accumulate enough money for a down payment on a house, a couple deposits $668 per month…
A:
Q: A$91,000 mortgage is to be amortized by making monthly payments for 15 years Interest is 6.7%…
A: When the lender lends a loan to the borrower, he charges a rate of interest on the borrowed amount.…
Q: 3. Amortization Schedule. Use Excel and calculator. You decide to buy a new BMW that costs $50,000.…
A: Amortization refers to the systematic and regular repayment of loan amount over a period of tenure…
Q: The coupon rate on an issue of debt is 9%. The yield to maturity on this issue is 12%. The corporate…
A: Here,Coupon rate is 9%Yield to maturity is 12%Tax rate is 33%
Q: When a firm issues stock, it has: O A. borrowed from the public. OB. purchased foreign currency. OC.…
A: When firm issues stock, it sells ownership of company in the form of equity shares to…
Q: 39. In Geri Co, the 5 year weighted average historical pre-tax economic earnings are $1,250,000. The…
A: Capitalization of earnings is a method of valuation in which the earnings (usually taken on an…
Q: Firm X is considering the replacement of an old machine with one that has a purchase price of…
A: Net cash outflow for new machine is that amount which is paid by the investor at initial level of…
Q: isk and Return: Introduction isk is an important concept affecting security prices and rates of…
A: Risk and return are foundational concepts in finance, representing the dynamic relationship between…
Q: Ursala, Incorporated, has a target debt-equity ratio of 65. Its WACC is 9.3 percent, and the tax…
A: >WACC is the cost of capital of the company and is weighted cost of equity and weighted cost of…
Q: Jenna Baker, CEO of Baker Mfg Inc., wishes to compare her company's inventory turnover to those of…
A: Variables in the question:Net revenue=$27500Cost of sales=$ 21450Inventory=$ 1300Total assets=$…
Q: Assume that the financial markets are in equilibrium. Information on three particular shares is…
A: We will use and apply the CAPM model i.e. the capital asset pricing model. This model shows the…
Q: company will receive €75 million in 1 year from an Italian customer. observe the following data.…
A: Amount to be received=€75 millionForward rate=$1.30:€1.00Amount to be received in dollars.
Q: You purchased a machine for $1.17 million three years ago and have been applying straight-line…
A: Straight Line depreciation= (Costs-Salvage Value)/Useful Lif= (1170000-0)/7= $…
Q: Assume the one period binomial model with initial share price £400, up and down factors u = 1.25, d…
A: The binomial distribution is a discrete probability distribution that characterizes the number of…
Q: Suppose that initially a share price is £80 and each month thereafter either increases by 1% or…
A: A mathematical model used in finance to value options is called the binomial model. It makes the…
Q: A corporation's pension plan provides a lifetime annual income to its employees upon retirement at…
A: Salary=$62879Period=16 yearsAnnual percentage=2%
Q: Consider the following information: Probability of State of Economy State of Economy Recession Boom…
A: Probability of Recession = 0.29Probability of Boom = 0.71Return under Recession = -0.09Return under…
Q: Question 3 A stock has an HPR of 8.7% and a CAPM return of 10.5%. Which of the following is true?…
A: Beta is a financial metric that measures a stock's sensitivity to market movements, particularly in…
Q: Treasury spot rates are as follows in today's market: Maturity (years) Spot rate 1 2.2% 4+ decimals…
A: Coupon rate = 5.2%Par value = $1,000Coupon payment = Coupon rate x Par value = 5.2% x 1000 =…
Q: You want your portfolio beta to be 1.16. Currently, your portfolio consists of $3,000 invested in…
A: Beta aids investors in evaluating the systematic risk of an investment.The portfolio beta is…
Q: Rockmont Recreation Inc. is considering a project that has the following cash flow and WACC data.…
A: Wacc = 10%Year: 01234Cash flow: -$900 $300 $320 $340 $360
Q: Last year, the Mexican peso/U.S. dollar exchange rate was MXN13.3769/$. Today, the exchange rate is…
A: Value = 14,680,000S1 = 13.3769S2=16.4196
Q: All but one of the following is a bank liability. O repurchase agreements O fed funds sold demand…
A: A bank liability refers to a financial obligation or debt that a bank owes to external parties. In…
Q: What is the project's NPV(net present value) if you use a required rate of 14% ?
A: Net present value is determined by deducting the initial investment from the current value of cash…
Q: The Bandon Pine Corporation's purchases from suppliers in a quarter are equal to 65 percent of the…
A: Cash outlays:Cash outlays refer to the actual expenditures made by an individual or entity for a…
Q: In aggregate, all banks in the US have total deposits of $8.2 trillion. Banks lend out all money…
A: Federal bank reserve, often referred to as "reserve deposits" or "bank reserves," are funds that…
Q: You are given the following information for Lightning Power Company. Assume the company's tax rate…
A: The Weighted Average Cost of Capital (WACC) is the average cost of a company's capital. It takes…
Q: The total value (debt plus equity) of Wilson Dover Inc. is $500 million and the face value of its 1…
A: Black scholes model:The model takes into account factors such as the current stock price, the…
Q: (Related to Checkpoint 9.3) (Bond valuation) Pybus, Inc. is considering issuing bonds that will…
A:
Q: Keeds Products has projected the following sales for the coming year 01 02 03 04 Sales $ 14,600…
A: A critical component of budgeting and business planning is generating a sales estimate. It assists…
Q: The Lumber Yard has projected the sales below for the next four months. The company collects 36…
A: Company may make sales either on cash basis or credit basis.Generally , in credit sales , debtors…
Q: What is the coupon rate of an annual coupon paying 30-year bond that is selling at $897.26 and has a…
A: Bonds refer to instruments used by the issuing company to raise debt capital from non-traditional…
Q: Riverside Bank offers to lend you $50,000 at a nominal rate of 6.5%, compounded monthly. The loan…
A: Reserve Bank offers to lend $50,000 @6.5% compounded monthly.
Q: andom Tools is currently an all-equity firm that has 7,200 shares of stock outstanding at a narket…
A: Share Repurchase:Share repurchase (also known as buy-back) refers to the decision of the firm to buy…
Q: VD Industries capital structure consists of 43% debt and the remaining structure in equity. Four…
A: The WACC of a company refers to the average profits that the company provides to all its…
Step by step
Solved in 3 steps with 2 images
- Accounting for Fair Value Hedge: Interest Rate Swap On January 1 of Year 1, Innovative Lab issued a 4-year $50,000 note to a local bank with fixed interest payments based on 6%, payable annually on December 31. To hedge the risk of a fixed interest payment, Innovative Lab entered into a 4-year interest rate swap agreement on January 1 of Year 1, calling for interest payments tied to a designated benchmark interest rate to a counterparty and receipt of interest based on 6%, negotiated at a notional amount of $50,000. The settlement date for the net cash payment is on December 31 of each year. The following table provides additional information related to the interest rate swap as forecasted over the next 4 years. Fair value: Interest rate swap Fair value: note payable Benchmark interest rate Required Dec. 31, Year 1 Dec. 31, Year 2 Dec. 31, Year 3 Dec. 31, Year 4 $200 $0 $50,200 4.2% $400 $50,400 4.0% $0 $50,000 5.2% $50,000 5.8% a. Record the required journal entries for Year 1, Year…A saving account earns a nominal rate i©) = 0.06 . If the income tax of the earnings from this account is at 25%, and suppose the annual inflation is at 2.4%, what is the annual after tax real rate of return? 0.0216 0.0275 0.0205 0.0366Using the following expected interest payments, cost of debt = 5%, and tax-rate = 21%, calculate the TAX SHIELD. Expected interest year 1 = 50; year 2 = 35; year 3 = 20; year 4 = 10; 5 = 0 a) 101.36 b) 46.37 c) 158.33 d) 82.85
- Using the following expected interest payments, cost of debt = 5%, and tax-rate = 21%, calculate the TAX SHIELD. Expected interest year 1 = 50; year 2 = 35; year 3 = 20; year 4 = 10; 5 = 0 Group of answer choices 101.36 158.33 82.85 46.37Given the following information: What is the risk premium? 9.02% O 12.98% Before- tax, risk free discount rate = 15%; After-tax, risk adjusted discount rate = 15.58% Marginal tax rate = 18% 4% None of the answers are correctUse these present value tables to answer the question that follow. Below is a table for the present value of $1 at Compound interest. Year 6% 10% 12% 1 0.943 0.909 0.893 2 0.890 0.826 0.797 3 0.840 0.751 0.712 4 0.792 0.683 0.636 5 0.747 0.621 0.567 Below is a table for the present value of an annuity of $1 at compound interest. Year 6% 10% 12% 1 0.943 0.909 0.893 2 1.833 1.736 1.690 3 2.673 2.487 2.402 4 3.465 3.170 3.037 5 4.212 3.791 3.605 Using the tables above, what would be the present value of $17,508 (rounded to the nearest dollar) to be received four years from today, assuming an earnings rate of 10%? a.$17,508 b.$13,866 c.$55,500 d.$11,958 how to do this 1? Use these present value tables to answer the question that follow. Below is a table for the present value of $1 at Compound interest. Year 6% 10% 12% 1 0.943 0.909 0.893 2 0.890 0.826 0.797 3 0.840 0.751 0.712 4 0.792 0.683 0.636 5 0.747 0.621 0.567 Below is a…
- Use these present value tables to answer the question that follow.Below is a table for the present value of $1 at compound interest. Year 6% 10% 12% 1 0.943 0.909 0.893 2 0.890 0.826 0.797 3 0.840 0.751 0.712 4 0.792 0.683 0.636 5 0.747 0.621 0.567 Below is a table for the present value of an annuity of $1 at compound interest. Year 6% 10% 12% 1 0.943 0.909 0.893 2 1.833 1.736 1.690 3 2.673 2.487 2.402 4 3.465 3.170 3.037 5 4.212 3.791 3.605 Using the tables above, what would be the internal rate of return of an investment of $227,460 that would generate an annual cash inflow of $60,000 for the next five years?Use these present value tables to answer the question that follow. Below is a table for the present value of $1 at Compound interest. Year 6% 10% 12% 1 0.943 0.909 0.893 2 0.890 0.826 0.797 3 0.840 0.751 0.712 4 0.792 0.683 0.636 5 0.747 0.621 0.567 Below is a table for the present value of an annuity of $1 at compound interest. Year 6% 10% 12% 1 0.943 0.909 0.893 2 1.833 1.736 1.690 3 2.673 2.487 2.402 4 3.465 3.170 3.037 5 4.212 3.791 3.605 Using the tables above, what is the present value of $16,491.00 (rounded to the nearest dollar) to be received at the end of each of the next four years, assuming an earnings rate of 12%? a.$59,450 b.$16,491 c.$50,083 d.$39,611 Use these present value tables to answer the question that follow. Below is a table for the present value of $1 at Compound interest. Year 6% 10% 12% 1 0.943 0.909 0.893 2 0.890 0.826 0.797 3 0.840 0.751 0.712 4 0.792 0.683 0.636 5 0.747 0.621 0.567 Below is a…Use these present value tables to answer the question that follow.Below is a table for the present value of $1 at compound interest. Year 6% 10% 12% 1 0.943 0.909 0.893 2 0.890 0.826 0.797 3 0.840 0.751 0.712 4 0.792 0.683 0.636 5 0.747 0.621 0.567 Below is a table for the present value of an annuity of $1 at compound interest. Year 6% 10% 12% 1 0.943 0.909 0.893 2 1.833 1.736 1.690 3 2.673 2.487 2.402 4 3.465 3.170 3.037 5 4.212 3.791 3.605 Using the tables above, what would be the present value of $8,000 to be received one year from today, assuming an earnings rate of 12%?
- How does it change from year 1 to year 2? Answer: Real spending is 10 year-1 dollar in year 1, and 20 year-1 dollar in year 2. d. Defining the implicit price deflator as nominal spending divided by real spending, compute the deflator for each year. How does the deflator change from year 1 to year 2? Answer: The implicit price deflator is 1 in year 1, and 0.5 in year 2. Inflation is -50%. E. Suppose that Abby is equally happy eating red or green apples. How much has the true cost of living increased for Abby? Compare this answer to your answers to parts (a) and (d). What does this example tell you about Laspeyres and Paasche price indexes?If the expected inflation rate is 3.45%, the realized real rate of return is 3.80%, and the actual inflation rate is 2.15%, what is the required real rate of return? а. 1.45% b. 2.50% С. 5.60% d. 2.35%To find the after-tax interest rate, the before tax interest rate is multiplied by If the current and expected future one-year interest rates are 5%, 6%, 7%, using the expectations theory of the term structure, the three-year interest rate is ___? If the current and expected future one-period interest rates are 5%, 6%, 7%, 5% and 5%, and the liquidity premium is 0.4%, the five-period interest rate is A steep yield curve indicates that interest rates are expected to future. in the An inverted yield curve may be due to a Federal Reserve policy of increasing short- term interest rates to fight what economic problem?