A $100,000 bond portfolio generates exactly $9,000 per year in income. Another $100,000 portfolio currently yields $ 7,000 per year in income, but this amount is expected to grow at 4 percent annually. In about how many years will the two portfolios yield equal amounts?
A person is about to retire and must choose between three retirement plan options. One provides $55,000 per year for the remainder of his life. Another provides 85% of this amount and increases by 5 percent each year. A third option gives him a $400,000 lump sum settlement. If his remaining life...
Year Cash flow(x) Cash flow(y) 0 -$15,000 -$15,000 1 $8,150 $7,700 2 $5,050 $5,150 3 $6,800 $7,250 Draw the NPV profiles for X and Y over a range of discount rates from zero to 25%. What is the crossover rate...
Sam and Linda Fleming have come to you for financial advice. Linda is very nervous about finances and money in general. She does not like the stock market and would feel more secure if all of their savings was in a box buried in the backyard. Sam is 40 years old and owns his own...
Consider the following two mutually exclusive projects. Year Cash Flow(A) Cash Flow (B) 0 -$300,000 -$40,000 1 20,000 19,000 2 50,000 12,000 3 50,000 18,000 4 390,000 10,500 If you apply the payback...
I need to answer this Q.
Please answer Question 4 in the attached file.
An investor wishes to ride the yield curve to higher profits on an investment of $1,000. He observes in the market a zero-coupon T-note with one year left to maturity yielding 5 percent and another zero-coupon T-note yielding 7 percent with two years to maturity. What investment strategy...
2. The Warren & Smith Company manufactures commercial zippers of two kinds, kind X and kind Y. Its production department estimates that the average-cost function of the firm is AC= X2+2Y2-2XY-2X-6Y+20 a. How many units of X and Y should management produce if the firm expects...
1. A fir a firm's current balance sheet is as follows: Assets $100 Debt $10 Equity $90 1. 1.What is the firm's weighted-average cost of capital at various combinations of debt and equity, given the following information? Debt/Assets After-Tax Cost of Debt Cost of Equity...
Ask a new Finance Question
Tips for asking Questions
- Provide any and all relevant background materials. Attach files if necessary to ensure your tutor has all necessary information to answer your question as completely as possible
- Set a compelling price: While our Tutors are eager to answer your questions, giving them a compelling price incentive speeds up the process by avoiding any unnecessary price negotiations
1. Can you help me with this valuation problem?: Imagine that you are trying to evaluate the economics of purchasing an automobile. You expect the car to provide annual after-tax cash benefits of $1,200 at the end of each year and assume that you can sell the car for after-tax proceeds of $5,000 at the end of the planned 5-year ownership period. All funds for purchasing the car will be drawn from your savings, which are currently earning 6% after taxes.
- a.Identify the cash flows, their timing, and the required return applicable to valuing the car.
- b.What is the maximum price you would be willing to pay to acquire the car? Explain.
2. How do you calculate the before tax-cost of the Sony bond and the after-tax cost of the Sony bond given the following information?:
- David Abbot is interested in purchasing a bond issued by Sony. He has obtained the following information on the security:
- Sony bond
- Par value $1,000 Coupon interest rate 6% Tax bracket 20%
- Cost $930 Years to maturity 10