Log in
Accounting
1
answer
0
watching
55
views
7 May 2018

B. A biotech company has a drug in development that will allow you to sell your firm for $10 billion next year. Assume your boss wants you to use the CAPM. Your firm has a beta of 4, the risk-free rate is 5% per year, and the equity premium is 2% per year. What do you think the firm is worth today?

C. Your borrowing rate is 15% per year. Your lending rate is 5% per year. The project costs $1,000 and has a rate of return of 10%. 1. Assume you have $500 of your own money to invest. Should you invest in this project?

Watch
1
answer
0
watching
55
views

For unlimited access to Homework Help, a Homework+ subscription is required.

Reid Wolff
Reid WolffLv2
9 May 2018

Unlock all answers

Get 1 free homework help answer.
Already have an account? Log in
Share

Related questions

Using the Payback Method, IRR, and NPV Problems Purpose ofAssignment The purpose of this assignment is to allow the studentto calculate the project cash flow using net present value (NPV),internal rate of return (IRR), and the payback methods. AssignmentSteps Resources: Corporate Finance Calculate the following timevalue of money problems in Microsoft Excel or Word document. Youmust show all of your calculations. If you want to accumulate$500,000 in 20 years, how much do you need to deposit today thatpays an interest rate of 15%? What is the future value if you planto invest $200,000 for 5 years and the interest rate is 5%? What isthe interest rate for an initial investment of $100,000 to grow to$300,000 in 10 years? If your company purchases an annuity thatwill pay $50,000/year for 10 years at a 11% discount rate, what isthe value of the annuity on the purchase date if the first annuitypayment is made on the date of purchase? What is the rate of returnrequired to accumulate $400,000 if you invest $10,000 per year for20 years. Assume all payments are made at the end of the period.Calculate the project cash flow generated for Project A and ProjectB using the NPV method. Which project would you select, and why?Which project would you select under the payback method? Thediscount rate is 10% for both projects. Use Microsoft® Excel® toprepare your answer. Note that a similar problem is in the textbookin Section 5.1. Sample Template for Project A and Project B: Showall work. Submit the all calcluations. Click the Assignment Filestab to submit your assignment.

CORP FIN FINAL PT D

25. You want to have $1 million in your savings account when you retire. You plan on investing a single lump sum today to fund this goal. You are planning on investing in an account which will pay 7.5% annual interest. Which of the following will reduce the amount that you must deposit today if you are to have your desired $1 million on the day you retire (there could be more than one answer)?

A. Invest in a different account paying a higher rate of interest. B. Invest in a different account paying a lower rate of interest. C. Retire later. D. Retire sooner.

26. In calendar 2018, you earned a salary of $55,000. You expect to be given 4% annual merit increases on January 1 of each year for the foreseeable future. What is your projected annual salary in 2023? (Show calculation)

27. You have won a contest that will pay you $10,000 a year at the end of each of the next 5 years. Based on a discount rate of 8% per year, what is the annuity worth to you today? (Show calculation)

1. How much should you be willing to pay for one share of stock if the company just paid a $2.75 dividend, you expect the dividends to increase by 5% annually, and you need a 14% return on your investment? (Show calculation)

1. What is the net present value of a project that has an upfront cash outlay of $30,000, and generates cash inflows of $15,000 in year 1, $20,000 in year 2, and $25,000 in year 3 assuming that the company’s cost of capital is 12.5% per year? (Show calculation)

45. You are depositing $18,000 in a retirement account today and expect to earn an average return of 6% per year on this money. How much additional income will you earn if you leave the money invested for 24 years instead of just 20 years?

PLEASE SHOW YOUR WORK NO SCREEN SHOTS OR IMAGES OF RESPONSE. PLEASE TYPE YOUR ANSWER OR UPLOAD DOCUMENT IF REQUIREMENTS MENTIONED ABOVE ARE NOT MET I WILL GIVE A NEGATIVE RATING

9) A project costs $3000 immediately. The project yields nominalreturns of $100 in year 1, $200 in year 2, $300 in year 3, $400 inyear 4, and $500 in year 5. In addition, the project will havecapital worth $2500 (in nominal $) left over in year 5. The realdiscount rate is 7% and the expected inflation rate is 3%. What isthe NPV of this project? 10)You have $2000 to invest, and arechoosing between two projects, both of which cost $2000 up frontand will yield six years of returns. The returns for the firstinvestment will be paid in nominal $, starting at $400 a year fromnow and increasing at 8% annually. The returns for the second willbe paid in real $, starting at $500 and increasing at 2% annually.If your real hurdle rate is 4.5% and the expected inflation rate is3.1%, which of these investments should you choose (if any)?

Related Documents

ACC2200
Final Exam
Study Guide
ACC2200 Study Guide - Final Guide: Discounted Cash Flow, Capital Expenditure, Net Present Value
goldcrocodile909
ACC 311 Lecture Notes - Lecture 6: Compound Interest, Financial Statement, Accrued Interest
crimsoncod838
ACC 210 Lecture Notes - Lecture 15: Compound Interest, Interest, Cash Flow
purplewater-buffalo170

Weekly leaderboard

Home
Homework Help 3,900,000
Accounting 580,000
Start filling in the gaps now
Log in