If you have the following information Discounted Cash Flow Year Cash Flow Discounted Cash Flow 0 $ - 22 million 1 $2 million 2 $2 million 3 $8 million 4 $8million 5 $12 million The discount rate is % 5 Calculate the NPV
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If you have the following information
|
Discounted Cash Flow |
||
|
Year |
Cash Flow |
Discounted Cash Flow |
|
0 |
$ - 22 million |
|
|
1 |
$2 million |
|
|
2 |
$2 million |
|
|
3 |
$8 million |
|
|
4 |
$8million |
|
|
5 |
$12 million |
|
The discount rate is % 5
Calculate the
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Solved in 3 steps
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- Suppose you are 45 and have a $410,000 face amount, 15-year, limited-payment, participating policy (dividends will be used to build up the cash value of the policy). Your annual premium is $1,435. The cash value of the policy is expected to be $16,400 in 15 years. Using time value of money and assuming you could invest your money elsewhere for a 7 percent annual yield, calculate the net cost of insurance. Use (Exhibit 1-A, Exhibit 1-B, Exhibit 1-C, Exhibit 1-D)Rollo Megabux has $1 million to invest in stocks orbonds. The percentage yield on each investment during thecoming year depends on whether the economy has a goodor a bad year (see Table 17). It is equally likely that theeconomy will have a good or a bad year.a If Rollo is risk-neutral, how should he invest hismoney?b For $10,000, Rollo can hire a consulting firm toforecast the state of the economy. The consulting firm’sforecasts have the following properties:P(good forecast|economy good) .80P(good forecast|economy bad) .20Should Rollo hire the consulting firm? What are EVSIand EVPI? Economy EconomyHas Good Has BadYear YearYield on stocks 22% 10%Yield on bonds 16% 14%BADLY NEED YOUR HELP PLEASE. 1.) True or false? Briefly explain. _____ Your firm has the opportunity to invest $20 million in a new project. The interest rate on the firm’s debt is 7% and the cost of equity is 14%. The cost of capital for the project depends on whether the firm finances the project with new debt or new equity. _____ You are thinking about investing in either stock A or stock B. Both stocks have an expected return of 12%, but stock A has a standard deviation of 25% annually and stock B has a standard deviation of 35% annually. You should invest in stock A since it is less risky. _____ Your firm currently has a debt-to-equity ratio of 10%: debt = $50 million and equity = $500 million (market values). The interest rate on the firm’s debt (rD) is 8% and the cost of equity (rE) is 13%. Since the cost of debt rD is lower than the cost of equity rE, the firm can lower its overall cost of capital by borrowing more. Ignore taxes.