PRIN.OF CORPORATE FINANCE
13th Edition
ISBN: 9781260013900
Author: BREALEY
Publisher: RENT MCG
expand_more
expand_more
format_list_bulleted
Question
thumb_up100%
Chapter 4, Problem 11PS
a)
Summary Introduction
To determine: The expected earnings of three different investors.
Expert Solution & Answer
Trending nowThis is a popular solution!
Students have asked these similar questions
The Annual Return is the average Annual Percentage Yield (APY) of an investment over a TT-year time period.Annual Return =(Ending ValueInitial Value)1T−1=(Ending ValueInitial Value)1T-1Kristina pays $5,000 for shares in a new company. She sells the shares 10 years later for $22,500. What was her annual return on this investment? Round your answer to the nearest tenth of a percent.The Annual Return on Kristina's investment is
An investor plan to invest in a business that will produce a continuos income stream over the next 3 years with rate of flow f(t) = 3+5 ( thounsand of dollars). If the stream earns an interest at 5% coumpound continuously< how much the investor will have by the of third year?
Using Table 1-1 onpage 19, calculate the following:(a) The future value of lump-sum investment of $4,000 in four years thatearns 5 percent.(b) The future value of $1,500 saved each year forthree years that earns 6 percent.(c) A person who invests $1,200 each year finds onechoice that is expected to pay 3 percent per yearand another choice that may pay 4 percent. Whatis the difference in return if the investment is madefor four years?(d) The amount a person would need to deposit todaywith a 5 percent interest rate to have $2,000 inthree years.
Chapter 4 Solutions
PRIN.OF CORPORATE FINANCE
Ch. 4 - Stock markets True or false? a. The bid price is...Ch. 4 - Stock quotes a. I would like to sell 1000 shares...Ch. 4 - Stock quotes Here is a small part of the order...Ch. 4 - Stock quotes Go to finance.yahoo.com and get...Ch. 4 - Valuation by comparables Look up P/E and P/B...Ch. 4 - Dividend discount model True or false? a. All...Ch. 4 - Dividend discount model Respond briefly to the...Ch. 4 - Dividend discount model Company X is expected to...Ch. 4 - Dividend discount model Company Y does not plow...Ch. 4 - Constant-growth DCF model Company Zs earnings and...
Ch. 4 - Prob. 11PSCh. 4 - Constant-growth DCF model Pharmecology just paid...Ch. 4 - Prob. 13PSCh. 4 - Cost of equity capital Under what conditions does...Ch. 4 - Cost of equity capital Each of the following...Ch. 4 - Two-stage DCF model Company Z-prime is like Z in...Ch. 4 - Two-stage DCF model Consider the following three...Ch. 4 - Two-stage DCF model Company Qs current return on...Ch. 4 - Two-stage DCF model Compost Science Inc. (CSI) is...Ch. 4 - Growth opportunities If company Z (see Problem 10)...Ch. 4 - Growth opportunities Alpha Corps earnings and...Ch. 4 - Prob. 24PSCh. 4 - Prob. 25PSCh. 4 - Prob. 26PSCh. 4 - Horizon value Suppose the horizon date is set at a...Ch. 4 - Valuing a business Permian Partners (PP) produces...Ch. 4 - Valuing a business Construct a new version of...Ch. 4 - Valuing a business Mexican Motors market cap is...Ch. 4 - Valuing a business Phoenix Corp. faltered in the...Ch. 4 - Constant-growth DCF formula The constant-growth...Ch. 4 - DCF valuation Portfolio managers are frequently...Ch. 4 - Valuing a business Construct a new version of...
Knowledge Booster
Similar questions
- Use the formula for the effective rate (annual effective yield) reff = (A/P)1/t − 1 where P is an initial investment in dollars, A is an accumulated amount in dollars, and t is time in years, to solve the exercise.Martha invested $50,000 in a boutique 6 years ago. Her investment is worth $80,000 today. What is the effective rate (annual effective yield) of her investment? (Round your answer to two decimal places.)arrow_forwardSolving for Rates What annual rate of return is earned on a $3,300 investment when it grows to $7,100 in nineteen years?arrow_forwardInterest rate (with changing years). Keiko is looking at the following investment choices and wants to know what annual rate of return each choice produces. a. Invest $400.00 and receive $790.15 in 9 years. b. Invest $3,600.00 and receive $11,432.56 in 16 years. c. Invest $30,118.98 and receive $100,000.00 in 20 years. d. Invest $34,767.89 and receive $1,100,000.00 in 35 years.arrow_forward
- An investment company is considering one of two possible business ventures. Project 1 gives a return of $250 000 in four years’ time, whereas Project2 gives a return of $350 000 in eight years’ time. Which project should thecompany invest in when the interest rate is 7% compounded annually?arrow_forwardTask 1The following are two investment scenarios:Scenario 1: £8,000 at 6.5% with simple interest rateScenario 2: £5,000 at 6.5% with annual compound interest rateIn Excel, draw up a table with the following data: Scenario number, Capital, Interest rate, Type of Interest. Then, please create a dynamic process in the table to calculate the accrued interest each year for 45 years from now on, for each of the scenario.Graph the sums accrued and identify what year the sums accrued swap from one investment being the largest to the other.Task 2A business has two projects to invest in, as follows:Create a new spread sheet, calculate NPV for the following projects at discount rates of 3% and 7%, respectively, by creating a dynamic process.Project 1 Project 2Year Cash inflows Cash outflows Cash inflows Cash outflows0 0.00 70,000.00 0.00 70,000.001 24,000.00 13,000.00 25,000.00 15,000.002 22,000.00 1,000.00 25,000.00 -3 25,000.00 - 20,000.00 -4 25,000.00 - 43,000.00 21,000.005 17,500.00 7,500.00…arrow_forwardAn investment in a real estate venture will provide returns at the end of the next four years as follows: year 1, $5,500; year 2, $7,500; year 3, $9,500; and year 4, $12,500. An investor wants to earn a 12 percent return compounded annually on her investment. How much should she pay for the investment? Assuming that the investor wanted to earn an annual rate of 12 percent compounded monthly, how much would she pay for this investment? Why are these two amounts different?arrow_forward
- Solve the following problem. Use Excel, financial calculator, or PV and FV Tables. Show your work with the formulas and figures inserted in them. What is the present value of an investment that pays AED 100,00 every year for four years if the interest rate is 8 percent compounded quarterly.arrow_forwardMark saves a fixed percentage of his salary throughout each year. This year he saved $1500. For the next 5 years, he expects his salary to increase at an 8% annual rate, and he plans to increase his savings at the same 8% annual rate. He invests his money evenly twice a year in the stock market. There thus will be six midyear investments and six end of year investments. Solve the problem by using the geometric gradient factor. 2. How much will the investment be worth at the end of the six years if they increase in the stock market at a 8% annual rate? Select one: a. $12,911 b. $13,299 c. $13,224 d. $13,512arrow_forwardPlease calculate this below (incl. the formula):a. What is PV of $100 received in year 10, with 1% discount rate?b. Hans made investment $10 million with interest rate 6% per annum. What is the value of Hans's investment after 4 years and interest compound annually.arrow_forward
- Kynan has an investment with the following annual returns for four years: • Year 1: 10% • Year 2: -3% • Year 3: 5% • Year 4: 11% What is the arithmetic average? The answer can be as a whole number or decimalKynan has an investment with the following annual returns for four years: • Year 1: 10% • Year 2: -3% • Year 3: 5% • Year 4: 11% What is the arithmetic average? The answer can be as a whole number or decimalarrow_forwardInvestment opportunity 1. Your parents are interested in getting advice on what is the best outcome at the end of a six-year period for investing a sum of money in the following options, given a 9% per annum earning rate. What is the preferred option? a. Invest $8,000 as a lump sum today.b. Invest $5,000 at the end of each of the next six years.c. Invest a lump sum of $6,000 today and $1,000 at the end of each of the next six years. d. Invest $1,200 at the end of years one, three and five.arrow_forwardEffective Yield The effective yield of an investmentplan is the percent increase in the balance after 1 year.Find the effective yield for each investment plan. Whichinvestment plan has the greatest effective yield? Whichinvestment plan will have the highest balance after5 years?(a) 7% annual interest rate, compounded annually(b) 7% annual interest rate, compounded continuously(c) 7% annual interest rate, compounded quarterly(d) 7.25% annual interest rate, compounded quarterlyarrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
