A company has the opportunity to take over a redevelopment project in an industrial area of a city. No immediate investment is required, but it must raze the existing buildings over a four-year period and, at the end of the fourth year, invest $2,400,000 for new construction. It will collect all revenues and pay all costs for a period of 10 years, at which time the entire project, and properties thereon, will revert to the city. The net cash flows are estimated to be as follows:
Tabulate the PW versus the interest rate and determine whether multiple IRRs exist. If so, use the ERR method when ∈ = 8% per year to determine a rate of retum. (5.7)
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- Problem 4: Today, you invest P100,000 into a fund that pays 25% interest compounded annually. Three years later, you borrow P50,000 from a bank at 20% annual interest and invest in the fund. Two years later, you withdraw enough money from the fund to repay the bank loan and all interest due on it. Three years from this withdrawal you start taking P20,000 per year out of the fund. After 5 withdrawals you withdraw the balance in the fund. How much was withdrawn?arrow_forwardSuppose that, to cover some of your college expenses, you are obtaining a personal loan form your uncle to be repaid in three years. If your uncle always earns 10% interest (compounded monthly) on his money invested in various sources and you paid him $20,223. What was the principal amount of the loan? $16.150 $15,500 $15.000 $16.000arrow_forwardGlobo-Chem Co. is expected to generate a free cash flow (FCF) of $1,065.00 million this year (FCF, = $1,065.00 million), and the FCF is expected to grow at a rate of 26.20% over the following two years (FCF, and FCF,). After the third year, however, the FCF is expected to grow at a constant rate of 4.26% per year, which will last forever (FCF.). Assume the firm has no nonoperating assets. If Globo-Chem Co.s weighted average cost of capital (WACC) is 12.78%, what is the current total firm value of Globo-Chem Co.? (Note: Round all intermediate calculations to two decimal places.) O $21,183,44 million O $3,183.42 million $17,652.87 million $23,939.64 million Globo-Chem Co.s debt has a market value of $13,240 million, and Globo-Chem Co. has no preferred stock, If Globo-Chem Co. has 600 million shares of common stock outstanding, what is Globo-Chem Co.s estimated intrinsic value per share of common stock? (Note: Round all intermediate calculations to two decimal places.) $8.09 O $6.35 O…arrow_forward
- Problem #3: A bond with face value of $5,000 pays quarterly interest of 1.5% each period. Twenty six (26) interest payments remain before the bond matures. How much would you be willing to pay for this bond today if the next interest payment is due now and you want to earn 8% compounded quarterly on your money? Note: Coupon Rate is 1.5% per quarter. Interest rate is 2% per quarter.arrow_forwardThe incomes for a business for five years are as follows: $8,250, $12,600, $9,750, $11,400, and$14,500. If the value of money is 12%, what is the equivalent uniform annual benefit for the fiveyear period?arrow_forwardA corporate bond has a face value of $1000 with a maturity date 20 years from today. The bond pays interest semiannually at a rate of 8% based on the face value (this means 8%/yr/semi). The interest rate paid on similar corporate bonds has decreased to a current rate of 6%/yr/semi (this would be i – the yield rate). What is the market value of this bond, or what should an investor pay for the bond?arrow_forward
- Spivey just won the Powerball lottery! The $20,000,000 jackpot will be paid in 20 annual installments of $1,000,000 each, with the first payment to be paid immediately. Spivey’s opportunity cost of capital (interest rate) is 6% per year. What is the present equivalent of Spivey’s lottery winnings at the time of the first payment?arrow_forwardIf you sell in March a bond future contract for 125 that matures on June 30 of the same year, and at the maturity date the same future sells for 135, you have a (profit/loss) of $arrow_forwardYou decide to open an individual retirement account (IRA) at your local stockbroker that pays 10%/year for the life of the account. You deposit $2,000 today to open the account. For the next 41 years, you will deposit $2,000 per year into the account at the end of each year. There are a total of 42 $2,000 deposits. Exactly 1 year after the last deposit, you will startmaking withdrawals. Solve, a. What is the balance in the account immediately after the last deposit? b. What annual withdrawal can you make if you want the withdrawals to last 15 years? c. What annual with drawal can you make if you want the withdrawals to last 20 years? d. What annual withdrawal can you make if you want the withdrawals tolast 25 years?arrow_forward
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