/hat is the exact rate of return?

Q: 5.7. Projects A through E are being considered by an investor. They all are ten-year projects and th...

A: Capital rationing is a concept that refers to analyzing the present value of inflows and outflows to...

Q: Bell Canada issues a 20 year bond with 3% coupon rate (paid semi-annually.) Other similar Bell Canad...

A: Bonds: Bonds are the liabilities of the company which is issued to raise the funds required to finan...

Q: How much will it cost to purchase an ordinary annuity delivering semiannual payments of $2000 for 12...

A: Present Value can be calculated using PV function in excel   PV (rate, nper, pmt, [Fv], [type]) Rat...

Q: You are a banker to Livingstone Thompson Limited, a textile manufacturing company. Livingstone Thomp...

A: Based on the cash flow we will discount the cash flow using the discount rates to find out the net p...

Q: You are negotiating the terms of a legal settlement. You have been given several different settlemen...

A: Present Value means value of future benefits at the current date. It is calculated by dividing 1+r f...

Q: A young woman 22 years old has just graduated from college. She accepts a good job and desire to est...

A: Current age = 22 Years Annual deposit (P) = P2000 Interest rate (r) = 15% Future value (FV) = 1,000,...

Q: Lawn Care, Inc., has sales of $367,400, costs of $183,600, depreciation of $48,600, interest of $39,...

A: Return on equity measures the return generated by common or equity shareholders from their sharehold...

Q: Five (5) years ago, your company purchased a skid-steer loader at the beginning of your construction...

A: Initial cost = $36000 Let S = Salvage value C = Annual cost = $6780 Total life of skid steer (n) = 7...

Q: What is the monthly payment on a loan of $5,000 at APR = 6% for 3 years

A: Monthly payment can be calculated by loan amount divided by present value factor of an ordinary annu...

Q: If you are calculating the present value of this cash flow under semiannual (twice per year) compoun...

A: Future Value: It represents the value of annual cash flows or the sum of money at a later/future da...

Q: At the beginning of each month, P 200 is deposited into a retirement fund. The fund earns 6% compoun...

A: An annuity is a series of equal payments made or received at regular intervals. When the cash flows ...

Q: If the YTM on a bond is 17.5 %, what will be the periodic rate assuming the bond is paying coupons s...

A: YTM = 17.5% Number of coupon payment per year = 2

Q: You don't spend frivously and save $950.00 of your take home pay at the end of every six months for ...

A: “Hi There, Thanks for posting the questions. As per our Q&A guidelines, must be answered only on...

Q: very successful health and recreation club wants to construct mock mountain for Climbing and exercis...

A: Net present value of the project is the present value of all future cost associated with the project...

Q: The manager of Cougar Fund needs to withdraw $35,000 seven years from today. If her account earns 7 ...

A: Amount to be deposited today will be present value of amount required after 7 years. The present val...

Q: What is the NPV of building this device, if the interest to borrow the funds is 15%?  (Round to near...

A: Net Present Value: It helps in analyzing the project's profitability and is computed from the diffe...

Q: Discuss the economic benefits for both. Briefly explain your understanding of an IPO, the net valuat...

A: The process of issuing shares of a private firm to the public in a fresh stock issuance is known as ...

Q: Statement I - Exchange rate risk is a factor that contributes to the difficulty of the company to ma...

A: Credit Period relaxation means extending the credit period given to our customer, it is beneficial i...

Q: In five years, P18,000 will be needed to pay for a building renovation. In order to generate this su...

A: Annuity refers to equal payments made in a fund at regular intervals. The amount so deposited genera...

Q: What is the required return for each security? Round your answers to two decimal places.   Stock A:...

A: Required Return: It refers to the minimum return acceptable to the investor for financing the busin...

Q: mon, common equity with a book value or $9 1 What weights should MV Corporation use in its WACC? mil...

A: WACC (Weighted Average Cost of Capital): WACC also known as a firm's average cost is computed by su...

Q: A new engine was installed by a textile plant at a cost of P388,000 and projected to have a useful l...

A: First cost (F) = P 388000 n = 12 years Salvage value (S) = P 37000 r = 14% compounded semiannually =...

Q: Ehrmann Data Systems is considering a project that has the following cash flow and WACC data. What i...

A: Year 0 cashflow (CF0) = - $1000 CF1 = $450 CF2 = $450 CF3 = $450 r = 10% n = 3 years

Q: Suppose a​ seven-year, $1,000 bond with a 5.98% coupon rate and semiannual coupons is trading with a...

A: Par value of bond (FV) = $1000 Coupon rate = 5.98% Semi annual coupon amount (C) = 1000*0.0598/2 = $...

Q: An asphalt road requires no upkeep until the end of 2 years when P60, 000 will be needed for repairs...

A: Equivalent uniform annual cost is the annual cost of repairing, maintaining an asset over its useful...

Q: HighTech Wireless just published its current income statement, which shows net income equal to $240,...

A: Hightech has no debt it means no interest expense.   Income before tax = Net income/(1 - tax rate)  ...

Q: A major property developer is concerned about lack of sales due to local economic conditions. To ens...

A: The effective annual rate of interest is the interest rate actually earned on the amount of loan or ...

Q: For a 20-year geometric cash flow progression increasing at 2% per year, the first-year amount is P1...

A:

Q: Equity: 120,000 shares at $1 each. Share premium: $22,000 The company decides to issue 1:3 shares....

A: Share Premium- This is the amount which is over and excess of nominal value. If Say for example if n...

Q: Why there is a difference between the interest rate and the APR

A: Interest rates and APR are two phrases that are sometimes used interchangeably to refer to comparabl...

Q: Boeing is looking to introduce a new jet, the 797, set to be available for purchase in 5 years. Acco...

A: NPV means PV of net benefits which will arise from the project during its life. It is computed by ta...

Q: The shares of toll road operator TransRural currently trade for $15 per share. Over the next 3 month...

A: It is a one step binomial model. Up factor "u" and down factor "d" is calculated and then C+ and C- ...

Q: Alice needs P 4,000 per year for four years to go to college. Her father invested P 5,000 in 7% acco...

A: Future value of an amount is calculated as: = Amount * (1+rate)^number of periods

Q: What lump sum of money must be deposited in a bank account at present time so that P 500 monthly can...

A: An annuity is a sequence of payments or deposits occurring at equal intervals of time for a given in...

Q: A Corporation is planning to loan P20M at an effective interest rate of 10%. The company pays income...

A: Loan amount = P20,000,000 Interest rate = 10% Tax rate = 30%

Q: Carl Hightop, a popular basketball player, has been offered a four-year salary deal. He can either a...

A: Option-A - Lump sum Lump sum payment = $4,800,000   Option-B - Quarterly payments   Quarterly paymen...

Q: Question: As data is attached to the image. You are required to comment/analyze on Artistic Denim Mi...

A: Leverage: The leverage of a company indicates how much of the asset is financed through debt. Debt i...

Q: Referencing Using Excel to Compute Interest and Maturity Date PROBLEM Compute interest and find the ...

A: Here, Total no. of days in a year = 360 days To Find: Interest =? Maturity date =?

Q: A man deposits P5,000 at the end of every year earning 7.50% compounded continuously. Determine the ...

A: Annual deposit (P) = P5000 Interest rate = 7.50% e = 2.7182818284590452353602874713527 Annual intere...

Q: Gator Fabrics Inc. currently has zero debt (i.e., wd = 0). It is a zero growth company, and  additio...

A: Weighted Average Cost of Capital (WACC) is equal to the cost of equity in case of a zero-debt compan...

Q: A new marketing campaign will cost $1 million to produce in year 0.  After the campaign is released,...

A:

Q: Find out debtors turnover ratio from the following information for one year ended 31st March 2014. A...

A: Debtors turnover ratio is the measure of finding out the efficiency of the company in collecting the...

Q: 5%, what amount must you donate to endow the scholarship?

A: Present Value of Perpetuity: It refers to the present worth of annual cash flows having an infinite...

Q: A Bond par value sh. 100 coupon rate 7%  investment period 10 years  a) Determine the value of the ...

A: A bond is represented as a fixed income security in which a borrower takes a loan from the investor ...

Q: Bart is a college student who has never invested his funds. He has saved ​$540 and has decided to in...

A: An initial investment accumulates interest. The future value is the accumulated value of the initial...

Q: What is the total interest paid on a loan of $5,000 at APR = 6% for 4 years.

A: Loan amount = $5000 Interest rate = 6% Period = 4 Years

Q: Discuss the economic benefits for both. Briefly explain your understanding of an IPO, the net valuat...

A: A financial market is any marketplace where securities are traded, such as the stock exchange, bond ...

Q: Find the final amount in the following retirement account, in which the rate of return on the accoun...

A:

Q: If stock prices follow a random walk, their prices bear no relation to the company's real activities...

A: Random walk theory states that change in the price of the company stock  is  random and cannot be pr...

Q: Your company is expected to earn (as a cash flow) $3 million next year, $3.06 million the following ...

A: Here, Cash Flow in Year 1 is $3 million Cash Flow in Year 2 is $ 3.06 million Cash Flow in Year 3 is...

Risk and return

Before understanding the concept of Risk and Return in Financial Management, understanding the two-concept Risk and return individually is necessary. 

Capital Asset Pricing Model

Capital asset pricing model, also known as CAPM, shows the relationship between the expected return of the investment and the market at risk. This concept is basically used particularly in the case of stocks or shares. It is also used across finance for pricing assets that have higher risk identity and for evaluating the expected returns for the assets given the risk of those assets and also the cost of capital.