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

Excel assignment you are going to purchase a new house

Excel Assignment You are going to purchase a new house valued at $250,000 by making the down payment of 20% and borrowing the rest as a 30-year fixed rate mortgage of 5.25%. Solve the problem by creating an Excel spreads ...

Mike is taking 2 classes this summer he is taking stat and

Mike is taking 2 classes this summer. He is taking Stat and History. He knows that he will earn either pass or fail each class. The results in each class are independent of one another. He also knows that he has a 10% ch ...

Consider the example in given figure with asymmetric

Consider the example in given Figure with asymmetric information: the two firms know which one is risky and which is safe, but savers do not. Keep the example the same as in the figure, except for the earnings of the ris ...

Financial reporting- horizontal amp vertical analysisyou

Financial Reporting- Horizontal & Vertical Analysis You will submit the following in both a horizontal and vertical analysis of the company Starbucks': • Accounts Receivable • Fixed Assets • Debt Financing Use basic fina ...

Suppose you borrow us30000000 at 7 for 30 years with 0

Suppose you borrow US$300,000.00 at 7% for 30 years with 0 points. Suppose also that the mortgage note includes a prepayment penalty of 1% of the mortgage balance if the mortgage is prepaid within 10 years. What is the e ...

Defend the following statement once an innovation appears

Defend the following statement: Once an innovation appears, it will remain even after the impetus for its development disappears. Give an example.

Explain how a recessionary output gap would emerge in an

Explain how a recessionary output gap would emerge in an economy where the long-run aggregate supply curve is persistently shifting to the right.

Nbspq1 nbspgiven the following assumptions construct cash

Q1.  Given the following assumptions, construct cash flows on both a de-levered and leveraged basis.  Make sure to label each clearly.  Project involved is a petrochemical plant. Indicate whether you agree that it could ...

Activity instructionchoose a country not the united states

Activity Instruction: Choose a country (not the United States or Canada) that has not already been chosen by another learner and post your country choice in the discussion area. Then, identify some political and currency ...

What are the advantages of fixed exchange rateswhat are the

What are the advantages of fixed exchange rates? What are the disadvantages? Does it matter if the country is large or small?

  • 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

A cola-dispensing machine is set to dispense 9 ounces of

A cola-dispensing machine is set to dispense 9 ounces of cola per cup, with a standard deviation of 1.0 ounce. The manuf

What is marketingbullwhat is marketing think back to your

What is Marketing? • "What is marketing"? Think back to your impressions before you started this class versus how you

Question -your client david smith runs a small it

QUESTION - Your client, David Smith runs a small IT consulting business specialising in computer software and techno

Inspection of a random sample of 22 aircraft showed that 15

Inspection of a random sample of 22 aircraft showed that 15 needed repairs to fix a wiring problem that might compromise

Effective hrmquestionhow can an effective hrm system help

Effective HRM Question How can an effective HRM system help facilitate the achievement of an organization's strate