Ask Question, Ask an Expert

+1-415-315-9853

info@mywordsolution.com

Ask Basic Finance Expert

1) Total market value of common stock of Molino is 6 million dollars and total value of debt is 4 million dollars. Treasurer estimates that beta of the stock is presently at 1.5 expected risk premium on the market is 6%, Treasury bill rate is 4%. Suppose for simplicity that debt of Molino's is risk free and company does not pay tax.

a) Determine the required return on Molino Stock
b) Evalaute the company cost of capital

2) Present Value-

As the winner of the Breakfast cereal competition you can select one of the give prizes which one would you select,

a) 100,000
b) 180,000 at the end of 5 years
c) 11,400 a year forever
d) 19,000 for each of the next 10 years
e) 6,500 next year increasing 5% a year forever

If interest rate is= 12% which is most valuable?

3) Annuities-

Sam is 65 years of age and has the life expectancy of 12 years more. He desires to invest 20,000 in the annuity which will make the level payment at the end of each year until his death. If interest is 8% what can Sam receive each year?

4) David and Jasmine are saving to purchase the boat at the end of 5 years. If boat costs 20,000 and they can earn= 10% a year on their savings how much do they require to save at the end of years 1 through 5?

IRR Rule-

Which is the best investment?

Cash Flows($thousands)

Project   Co     C1    C2     IRR
A         -400  +250  +300   23
B         -200  +140  +179   36

Opportunity cost of capital is 9%. John is tempted to take B which has higher IRR .

a) Describe to John why this is not the right procedure.

b) Illustrate him how to adapt IRR rule to select the best project.

c) Illustrate him that this project also has high NPV.

Basic Finance, Finance

  • Category:- Basic Finance
  • Reference No.:- M914351

Have any Question? 


Related Questions in Basic Finance

King manufacturing turns its inventory 91 times each year

King Manufacturing turns its inventory 9.1 times each year, has an average payment period of 35 days, and has an average collection period of 60 days. The firm's annual sales are $72 million, its cost of goods sold repre ...

Explain how a protective put is like purchasing insurance

Explain how a protective put is like purchasing insurance on a stock ? Why is choosing an exercise price on a protective put like deciding which deductible to take on an insurance policy? Discuss and compare the two bull ...

1 explain why dollar returns and percentage returns can

1. Explain why dollar returns and percentage returns can sometimes send conflicting signals when comparing two different investments. 2. Do the rankings of investment alternatives depend on whether we rank based on nomin ...

Discussion 1 170 wordsidentify a futures commodity exchange

Discussion 1: (170 words) Identify a futures commodity, exchange, stock, or interest rate. Use the internet to find a short history of the performance of this futures contract. Then research the possible reasons for this ...

1 if 2 buys pound1 and 22 buys pound1 how many euros are

1. If $2 buys £1 and 2.2 buys £1, how many euros are required to buy $1? 2. A student makes the following observation: "During May 2010, the euro depreciated sharply against the U.S. dollar. That was good news for attend ...

Company a has inventory equal to 100000 with a current

Company A has inventory equal to $100,000 with a current ratio of 2.3 and quick ratio of 1.8, what is the level of the firms current liabilities?

After reading the information contained on the web site

After reading the information contained on the Web site www.moneycrashers.com/ five-steps-to-effective-budgeting/, answer the following questions: a. What are three good sources of information that can be accessed to beg ...

All of us have a tendency to categorize people into

All of us have a tendency to categorize people into stereotypic groups. If you look around at the students on campus, you will see science geeks, artsy freaks, jocks, wallflowers, cheerleaders, and party animals, just to ...

1 how does the cost of canying inventory impact the

1. How does the cost of canying inventory impact the traditional earnings statement of the enterprise? 2. Discuss the relationship between service level, uncertainty, safety stock, and order quantity. How can trade-offs ...

Explain what we mean when we say that the binomial model is

Explain what we mean when we say that the binomial model is a discrete time model and the Black-Scholes-Merton model is a continuous time model? Explain the difference between a normal and a lognormal distribution as it ...

  • 4,153,160 Questions Asked
  • 13,132 Experts
  • 2,558,936 Questions Answered

Ask Experts for help!!

Looking for Assignment Help?

Start excelling in your Courses, Get help with Assignment

Write us your full requirement for evaluation and you will receive response within 20 minutes turnaround time.

Ask Now Help with Problems, Get a Best Answer

WalMart Identification of theory and critical discussion

Drawing on the prescribed text and/or relevant academic literature, produce a paper which discusses the nature of group

Section onea in an atwood machine suppose two objects of

SECTION ONE (a) In an Atwood Machine, suppose two objects of unequal mass are hung vertically over a frictionless

Part 1you work in hr for a company that operates a factory

Part 1: You work in HR for a company that operates a factory manufacturing fiberglass. There are several hundred empl

Details on advanced accounting paperthis paper is intended

DETAILS ON ADVANCED ACCOUNTING PAPER This paper is intended for students to apply the theoretical knowledge around ac

Create a provider database and related reports and queries

Create a provider database and related reports and queries to capture contact information for potential PC component pro