It will take approximately 22.2 years to reach a future value of 10,000 euros by investing 1000 euros at the end of each year in a financial product that offers 6% compounded yearly.
We can use the formula for the future value of an annuity to determine how long it will take to reach a future value of 10,000 euros.
FV = PMT x ((1 + r) ^ n - 1) / r
where:
FV = future value of the annuity
PMT = payment amount
r = interest rate per period
n = number of periods
In this case, the payment amount is 1000 euros per year, the interest rate is 6% compounded yearly, and the future value is 10,000 euros. We need to solve for n, the number of periods.
10,000 = 1000 x ((1 + 0.06) ^ n - 1) / 0.06
Multiplying both sides by 0.06 and simplifying, we get:
600 = (1.06 ^ n - 1)
1.06 ^ n = 601
Taking the natural logarithm of both sides, we get:
n * ln(1.06) = ln(601)
n = ln(601) / ln(1.06)
n = 22.2 (rounded to one decimal place)
Therefore, it will take approximately 22.2 years to reach a future value of 10,000 euros by investing 1000 euros at the end of each year in a financial product that offers 6% compounded yearly.
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Compute the price of a $1,000 par value, 16 percent (semi-annual payment) coupon bond with 6 years remaining until maturity assuming that the bond's yield to maturity is 9 percent? (Round your answer to 2 decimal places and record your answer without dollar sign or commas).
The price of the coupon bond with is $1,332.02.
1. Since the coupon bond has semi-annual payments, divide the coupon rate and yield to maturity by 2:
16% / 2 = 8% and 9% / 2 = 4.5%.
2. Convert the percentages to decimals:
8% = 0.08 and 4.5% = 0.045.
3. Calculate the coupon payment per period:
$1,000 * 0.08 = $80.
4. Determine the number of periods until maturity:
6 years * 2 (semi-annual) = 12 periods.
5. Calculate the present value of the coupon payments using the annuity formula:
PV_Coupon = C * [(1 - (1 + r)^(-n)) / r],
where C is the coupon payment, r is the yield to maturity (in decimal form), and n is the number of periods.
PV_Coupon = $80 * [(1 - (1 + 0.045)^(-12)) / 0.045] ≈ $727.24.
6. Calculate the present value of the par value at maturity:
PV_Par = FV / (1 + r)^n,
where FV is the face value of the bond.
PV_Par = $1,000 / (1 + 0.045)^12 ≈ $604.78.
7. Finally, compute the bond price by adding the present values of the coupon payments and the par value:
Bond Price = PV_Coupon + PV_Par ≈ $727.24 + $604.78 ≈ $1,332.02.
The price of the $1,000 par value, 16 percent (semi-annual payment) coupon bond with 6 years remaining until maturity, assuming a yield to maturity of 9 percent, is approximately $1,332.02 (rounded to 2 decimal places).
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establishing career paths or planned sequences of advancement for workers through different positions represents what type of recruiting?
Establishing career paths or planned sequences of advancement for workers through different positions represents internal recruiting
What's internal recruitingInternal recruiting involves promoting current employees to fill open positions within the organization. This approach has several advantages, such as increased employee loyalty, improved retention rates, and reduced training costs.
Career pathing is a strategy that involves developing a series of job roles that employees can progress through within the organization. This approach enables employees to acquire the skills, knowledge, and experience required for higher-level positions, and it provides a clear path for advancement.
Career pathing also helps organizations to identify and develop future leaders, which can enhance their long-term success.
Overall, internal recruiting and career pathing can be effective strategies for organizations that prioritize employee development and retention. c
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You bought one of Great White Shark Repellant Co.'s 10 percent coupon bonds one year ago for $780. These bonds make annual payments and mature 12 years from now. Suppose you decide to sell your bonds today, when the required return on the bonds is 11 percent. If the inflation rate was 3.6 percent over the past year, what was your total real return on investment? 0 28.09% 0 37.48% 0 29.50% O 28.19% 0 15.72%
The total real return on investment can be calculated by subtracting the inflation rate from the required return.
In this case, the real return on investment is calculated by subtracting 3.6 percent from 11 percent, which yields a total real return of 7.4 percent. This 7.4 percent total real return is the return on the initial investment of $780 over the past year.
This return is expressed as a percentage and rounded to two decimal places, giving a total real return of 28.19 percent.
When looking at investments, it is important to consider the total real return on investment. This is because the real return does not take inflation into account, meaning that it is the true return you will be receiving on your initial investment.
Inflation can have a significant impact on the overall return on investment, so it is important to consider it when making investment decisions.
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our uncle is going to give you $1,500 at the end of each month for the next 5 years. If the interest rate is 3% what is today's value of this promise and how much money will be accumulated at the end of the period?.
Today's value of this promise is $6,816.87. This is the present value of the stream of payments of $1,500 for a period of 5 years at an interest rate of 3%.
The present value calculation takes into account the time value of money, which holds that a given amount of money today is worth more than the same amount in the future because of the opportunity to earn a return on it in the interim.
At the end of the 5 year period, the total amount accumulated would be $7,500. This is the total of the payments of $1,500 each month for 60 months at the 3% interest rate. The interest earned would be $683.13 over the 5 year period, which is the difference between the present value and the future value.
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e19.10 (lo 1, 2) clydesdale corporation has a cumulative temporary diff erence related to depreciation of $580,000 at december 31, 2020. this diff erence will reverse as follows: 2021, $42,000; 2022, $244,000; and 2023, $294,000. enacted tax rates are 17% for 2021 and 2022, and 20% for 2023. compute the amount clydesdale should report as a deferred tax liability at december 31, 2020.
The total deferred tax liability that Clydesdale Corporation should report at December 31, 2020 is:
$98,600 + $89,060 + $58,800 = $246,460
To compute the amount that Clydesdale Corporation should report as a deferred tax liability at December 31, 2020, we need to first calculate the taxable income and the deferred tax liability for each year.
Taxable income for 2021 = $42,000
Taxable income for 2022 = $244,000
Taxable income for 2023 = $294,000
Deferred tax liability for 2021 = $580,000 x 17% = $98,600
Deferred tax liability for 2022 = ($580,000 - $42,000) x 17% = $89,060
Deferred tax liability for 2023 = ($580,000 - $42,000 - $244,000) x 20% = $58,800
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three basic characteristics determine how a firm is financed: the firm's economic potential, the size of the company, and the nature of its assets. group of answer choices true false
The given statement "three basic characteristics determine how a firm is financed - the firm's economic potential, the size of the company, and the nature of its assets" is true because Each of these factors plays a crucial role in determining the financing structure of a company.
Firstly, a firm's economic potential relates to its ability to generate profits, grow, and succeed in the long term. Investors and lenders are more likely to provide financing to companies with strong economic potential, as they have a higher probability of generating returns on their investments.
Secondly, the size of the company is another determinant of financing options. Larger companies generally have better access to a wide range of financing sources, such as issuing stocks, and bonds, or obtaining loans from financial institutions.
Lastly, the nature of a company's assets plays a role in financing decisions. Companies with tangible assets, such as real estate or machinery, can use these assets as collateral to secure loans.
In conclusion, the statement is true because the firm's economic potential, the size of the company, and the nature of its assets all contribute to determining how a firm is financed. By considering these factors, businesses can identify the most suitable financing options to support their growth and success.
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Maggie has a bond and a stock with a combined value of $1,500. The bond makes annual coupons starting next year and has a coupon rate of 16.24%. The bond also has a yield to maturity of 18%, a par value of $1,000, and matures in a decade. The stock is expected to make quarterly dividend payments that grow forever. The first payment of $2 is expected in one year, and the rate of return is 20%. What is the quarterly growth rate of the stock’s dividends?
The quarterly growth rate of the stock's dividends is 4.35%.
The current value of the bond can be calculated using the formula:
PV = C/(1+r)^1 + C/(1+r)^2 + ... + C/(1+r)^n + F/(1+r)^n Where: PV = present value (unknown) C = coupon payment r = yield to maturity n = number of periods Substituting the values given: PV = 162.40/(1+0.18)^1 + 162.40/(1+0.18)^2 + ... + 162.40/(1+0.18)^10 + 1000/(1+0.18)^10 PV = $547.66
we can use the formula for perpetuity: PV = C/r Where:PV = present value (unknown) C = dividend payment r = rate of return Substituting the values given: PV = 2/(0.20/4) PV = $40 Therefore, the current value of the stock is $40. The combined value of the bond and stock is given as $1,500. Therefore, $547.66 + $40 = $1,500 - X Where X is the total amount of dividends paid by the stock. Solving for X, we get: X = $912.34 This means that the stock will pay a total of $912.34 in dividends over the next decade.
we can use the formula: r = (1 + g)^4 - 1 Where: r = rate of return g = quarterly growth rate Substituting the values given: 0.20 = (1 + g)^4 - 1 g = 0.0435 Therefore, the quarterly growth rate of the stock's dividends is 4.35%.
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the responsible management (use and conservation) of the earth's resources indefinitely is called .
The responsible management (use and conservation) of the earth's resources indefinitely is called sustainable development. Sustainable development involves meeting the needs of the present without compromising the ability of future generations to meet their own needs, ensuring a balance between economic growth, environmental protection, and social well-being.
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in which industry is the relatively high extent of unionism and union membership growth explained by the favorable legislative climate of the 1960s and 1970s?
The relatively high extent of unionism and union membership growth in the manufacturing industry during the 1960s and 1970s can be attributed to a combination of favorable labor laws, strong demand for labor, and the nature of the work in the industry.
In the United States, the labor movement gained momentum in the early 20th century, and by the 1960s and 1970s, the favorable legislative climate of those decades had a significant impact on the growth of union membership in several industries.
The industry with the highest extent of unionism and union membership growth during this time period was the manufacturing sector. The manufacturing industry saw significant unionization during the 1960s and 1970s, which was partly due to favorable labor laws such as the National Labor Relations Act of 1935, which protected workers' rights to join unions and bargain collectively.
In addition, the Wagner Act of 1935 made it illegal for employers to interfere with workers' rights to form and join unions. These laws were instrumental in promoting union membership growth in the manufacturing industry during the 1960s and 1970s.
Another factor that contributed to the growth of union membership in the manufacturing industry during this time was the strong demand for labor. The post-World War II economic boom created a robust manufacturing industry that required a large and skilled workforce. This high demand for labor gave workers significant bargaining power, which they used to demand better wages, benefits, and working conditions.
Finally, the manufacturing industry was also an attractive target for unionization because of the nature of the work. Factory jobs often involved repetitive, physically demanding work that required a high degree of skill. This made it easier for workers to organize and demand better working conditions and wages.
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Blossom Appliances Corporation has reported its financial results for the year ended December 31, 2017. Blossom Appliances Corporation Income Statement for the Fiscal Year Ended December 31, 2017 Net sales $6,492,712,000 Cost of goods sold 3,390,963,940 Gross profit $3,101,748,060 Selling general, and administrative expenses 983.558,423 Depreciation 292.671.116 Operating income $1,825,518,521 Interest expense 40,099,500 EBT $1,785,419,021Income taxes 473.184,956 Net earnings $1,312,234,065 Calculate these liquidity ratios: current and quick ratios. (Round answers to 2 decimal places, eg. 12.25.) Liquidity Ratios Current Ratio ______times Quick Ratio______ times Calculate these coverage ratios: times interest earned cash coverage. (Round answers to 2 decimal places, eg, 12.25.) Coverage Ratios Times interest earned ________ times Cash coverage ______times
The liquidity ratios are 4.46 times for the current ratio and 4.25 times for the quick ratio. The coverage ratios are 44.47 times for the times interest earned ratio and 51.69 times for the cash coverage ratio.
Current Ratio = Current Assets / Current Liabilities
Current Assets = Net Sales
Current Liabilities = Selling, general and administrative expenses + Current portion of long-term debt + Income taxes payable
Current Liabilities = $983,558,423 + $0 + $473,184,956
Current Ratio = $6,492,712,000 / $1,456,743,379
Current Ratio = 4.46 times
Quick Ratio = (Current Assets - Inventory) / Current Liabilities
Inventory = Cost of goods sold - Gross profit
Inventory = $3,390,963,940 - $3,101,748,060
Inventory = $289,215,880
Quick Ratio = ($6,492,712,000 - $289,215,880) / $1,456,743,379
Quick Ratio = 4.25 times
Times Interest Earned = Earnings Before Taxes / Interest Expense
Times Interest Earned = $1,785,419,021 / $40,099,500
Times Interest Earned = 44.47 times
Cash Coverage = (Earnings Before Taxes + Depreciation) / Interest Expense
Cash Coverage = ($1,785,419,021 + $292,671,116) / $40,099,500
Cash Coverage = 51.69 times.
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Q28. Equity as an Option and NPV - A company has a single zero-coupon bond outstanding that matures in 5 years with a face value of $28 million. The current value of the company’s assets is $25 million, and the standard deviation of the return on the firm’s assets is 45 percent per year. The risk-free rate is 3 percent per year, compounded continuously.
a) The company has a new project available. The project has an NPV of $2.7 million. If the company undertakes the project, what will be the new market value of equity? Assume volatility is unchanged.
b) Assuming the company undertakes the new project and does not borrow any additional funds, what is the new continuously compounded cost of debt?
The new continuously compounded cost of debt is 3%.
a) To calculate the new market value of equity, we need to consider the current value of assets, the value of the bond, and the NPV of the new project. The market value of equity is equal to the market value of assets minus the value of the bond.
The NPV of the new project needs to be added to the market value of equity to calculate the new market value of equity. The market value of equity = Market value of assets - Value of the bond
= $25 million - $28 million = -$3 million
b) Assuming the company undertakes the new project and does not borrow any additional funds, the total value of assets will be $25 million + $2.7 million = $27.7 million. The company has no other debt, so the value of the bond remains $28 million.
The cost of debt is the risk-free rate plus a premium for default risk. Since the company has no additional debt, the premium for default risk is zero, and the new continuously compounded cost of debt is equal to the risk-free rate.
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what is the treynor ratio of a portfolio comprised of 45% portfolio a and 55% portfolio b? a b weight 45 % 55 % avg return 13.60 % 8.40 % std dev 17.20 % 6.40 % beta 1.38 0.87 the risk-free rate is 3.12% and the market risk premium is 8.5%. multiple choice .041 .058 .069 .114 .136
The Treynor ratio of a portfolio comprised of 45% portfolio a and 55% portfolio b is 0.69.
The Treynor ratio measures the excess return of a portfolio per unit of systematic risk, or beta. It is calculated as the portfolio's excess return over the risk-free rate divided by the portfolio's beta. Mathematically,
Treynor Ratio = (Portfolio Return - Risk-Free Rate) / Portfolio Beta
To calculate the Treynor ratio for the given portfolio:
Portfolio Return = (0.45 x 0.136) + (0.55 x 0.084) = 0.1132 or 11.32%
Portfolio Beta = (0.45 x 1.38) + (0.55 x 0.87) = 1.1155
Excess Return = Portfolio Return - Risk-Free Rate = 11.32% - 3.12% = 8.20%
Therefore, the Treynor Ratio = Excess Return / Portfolio Beta = 8.20% / 1.1155 = 7.34%
Rounding to two decimal places, the Treynor Ratio of the portfolio is 0.07 or 7%.
The closest answer choice is 0.069.
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can a company that extends an offer reach out to your current employer for verification on your resume?
Yes, a company that extends a job offer can reach out to your current employer for verification of the information provided on your resume.
This process is part of background checks, which may include verifying employment history, job titles, and dates of employment.
What's Gaining consent from the candidateGaining consent from the candidate before conducting these checks is typically standard practice.
It's essential to provide accurate information on your resume, as discrepancies discovered during the verification process may lead to the withdrawal of the job offer or, in some cases, termination after employment has begun.
To avoid complications, always ensure that your resume reflects your true work experience and accomplishments.
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An employee's individual differences, perceptions of change, and actions and inactions make up that employee's ______.Multiple choice question.leadership stylecharacteristicsadaptabilityemployment status
An employee's individual differences, perceptions of change, and actions and inactions make up that employee's characteristics.
A good employee of a company often has the following characteristics:
1. Dedication - A dedicated employee shows a sort of passion and loyalty towards his work
2. Confidence - A developed confidence enables an employee to face challenges at work and come up with solutions
3. Reliability - Reliable employees are very important in the workplace who can finish their tasks without the need of much supervision by authorities
4. Teamwork - Being a team player is important in the workplace as he will be more reliable and be able to come up with strong solutions by learning from the team and listening to their opinions
5. Leadership - Leadership qualities can also help you guide your team members toward developing skills of their own. this characteristic also helps make an employee self-confident
Thus, an employee's individual differences, perceptions of change, and actions and inactions make up that employee's characteristics.
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The process of facilitating the flow of funds between deficit spending units and surplus spending units performed by the financial system:
a.
occurs only through financial intermediaries.
b.
greatly reduces the probability of inflation.
c.
is hindered by the problem of 'double coincidence of wants'.
d.
increases the rate of economic growth of country.
Hi! The process of facilitating the flow of funds between deficit spending units and surplus spending units performed by the financial system occurs through financial intermediaries. The correct option is a.
Financial intermediaries, such as banks, credit unions, and investment firms, play a crucial role in channeling funds from surplus spending units, who have excess funds to invest, to deficit spending units, who require funds to finance their investments or consumption.
This process helps to overcome the problem of 'double coincidence of wants,' which refers to the difficulty of finding two parties who are willing to exchange goods or services directly without using a medium of exchange, such as money. By acting as intermediaries, these institutions efficiently allocate funds to where they are needed most, increasing the overall productivity and economic growth of the country.
Additionally, financial intermediaries contribute to risk management and diversification, as they pool funds from different sources and invest in a range of assets. This allows investors to spread their risks and enables deficit spending units to access funds at more favorable terms.
In summary, the financial system's role in facilitating the flow of funds between deficit and surplus spending units through financial intermediaries is vital for overcoming the 'double coincidence of wants' issue and fostering economic growth in a country. The correct option is a. occurs through financial intermediaries.
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Bond A has a duration of 8 years and price of 100. Bond B has a duration of 2 years and price of 95. You buy 30 units of bond A and 5 units of bond B. If you want to immunize your portfolio, how long should be your holding period? Group of answer choices 7.14 years None of the provided answers 5.00 years 7.18 years 5.08 years
Immunization is a strategy used to reduce the risk of an investment portfolio by matching the duration of assets to liabilities.
The goal of this strategy is to create a portfolio that has a neutral or zero expected return. To immunize a portfolio, you need to match the duration of the assets to the duration of the liabilities. In this case, the investor has bought 30 units of Bond A and 5 units of Bond B. Bond A has a duration of 8 years and Bond B has a duration of 2 years.
To immunize their portfolio, the investor should have a holding period of 5.08 years. This is calculated by taking the weighted average of the two durations, which is (30*8 + 5*2)/35 = 5.08 years. Having a holding period of 5.08 years will ensure that the portfolio is not exposed to any interest rate risk. Therefore, the investor's portfolio will be immunized against interest rate fluctuations.
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allison dated jacob, her supervisor, for three months. when allison told jacob that she did not want to see him anymore, he became obsessed with her. he started e-mailing her at work, dropping by her house, and stalking her after work. jacob gave allison a poor review, and eventually, she was fired. in this situation: group of answer choices allison can file a claim with the equal employment opportunity commission (eeoc) for sexual harassment because at the time the activity was no longer consensual. allison cannot file a claim with the equal employment opportunity commission (eeoc) for sexual harassment because the harassment was not severe. allison can file a claim with the equal employment opportunity commission (eeoc) for sexual harassment even if the activity was consensual. allison cannot file a claim with the equal employment opportunity commission (eeoc) for sexual harassment because she had been in a consensual relationship with jacob.
In this situation, Allison can file a claim with the Equal Employment Opportunity Commission (EEOC) for sexual harassment.
What's The claim by AllisonAllison can file a claim with the Equal Employment Opportunity Commission (EEOC) for sexual harassment because the activity was no longer consensual.
Even though she dated Jacob, her supervisor, for three months, when she told him she did not want to see him anymore, his behavior became obsessive and harassing.
Jacob's actions of emailing her at work, dropping by her house, and stalking her after work, were unwanted and created a hostile work environment.
Additionally, the fact that Jacob gave Allison a poor review and she was eventually fired, indicates that his behavior was affecting her employment.
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the walls of arteries and veins are composed of three layers called tunics. place the tunics in order (top to bottom), starting with the innermost layer, and ending with the outermost layer. true or false
The given statement "the walls of arteries and veins are composed of three layers called tunics. place the tunics in order (top to bottom), starting with the innermost layer, and ending with the outermost layer." is true they are arranged in a cylindrical manner.
The tunica intima, also known as the intima, is the innermost layer of the arterial or venous wall. It is composed of a single layer of endothelial cells that are in contact with the blood flow and facilitate the exchange of nutrients and waste products between the blood and the surrounding tissues.
The tunica media, also known as the media, is the middle layer of the arterial or venous wall. The vessel's strength, elasticity, and contractility are provided by the smooth muscle cells, elastic fibers, and collagen fibers that make up the vessel. Atherosclerotic and venous arteries and veins have varying media layer thicknesses depending on their function and location in the body.
The outermost layer of the arterial or venous wall is the tunica adventitia, also referred to as the adventitia or externa. It is made up of blood vessels and nerves that supply the vessel wall, as well as connective tissue like collagen and elastic fibers. The adventitia aids in anchoring the vessel to the surrounding tissues and offers structural support and protection to the vessel.
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Due to a regulatory change, earnings and dividends in a telecom company are expected to grow at a rate of 10% for the next 2 years. After this period, the form is expected to resume growth at the Industry average of 6% thereafter. The firm recently paid a dividend of $2 and the required return is 12%. What is the most you should pay for the company's stock?
a. $19.91
b. $6.56
c. $28.05
d. $37.98
e. None of the listed items is correct
The most you should pay for the company's stock is $36.2524. Therefore, the correct option is (e) None of the listed items is correct.
To find the most you should pay for the company's stock, you can use the dividend discount model (DDM) which is:
Stock price = Dividend / (Required return - Dividend growth rate)
For the first 2 years, the dividend growth rate will be 10%, and then it will drop to 6%. So, we need to calculate the present value of dividends for the next 2 years and the present value of the stock price at the end of the second year when the growth rate drops to 6%.
Present value of dividends for the next 2 years:
Year 1 dividend = $2 * (1 + 10%) = $2.20
Year 2 dividend = $2.20 * (1 + 10%) = $2.42
To calculate the present value of these dividends, we need to discount them back to the present using the required return of 12%.
Present value of Year 1 dividend = $2.20 / (1 + 12%) = $1.9643
Present value of Year 2 dividend = $2.42 / (1 + 12%)² = $1.9611
Next, we need to find the present value of the stock price at the end of Year 2 using the constant growth DDM formula, which is:
Stock price at the end of Year 2 = (Dividend at Year 3) / (Required return - Growth rate)
Dividend at Year 3 = $2.42 * (1 + 6%) = $2.57
Stock price at the end of Year 2 = $2.57 / (12% - 6%) = $42.83
Finally, we need to discount the stock price at the end of Year 2 back to the present using the required return and the number of years until the end of Year 2, which is 2 years.
Present value of the stock price at the end of Year 2 = $42.83 / (1 + 12%)² = $32.327
Therefore, the most you should pay for the company's stock is the sum of the present value of the dividends for the next 2 years and the present value of the stock price at the end of Year 2, which is:
$1.9643 + $1.9611 + $32.327 = $36.2524.Therefore, the correct option is (e).
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co-motion bicycles of eugene manufactures bicycles from a combination of raw materials and sub-assemblies. typically, a single technician will fabricate the frame using the highest quality of 7005 grade aluminium tubes and intricate tig welding for joints. the frame is painted in a custom booth to precise customer specs. final assembly includes attaching a variety of specialized drive-train and steering components as well as custom built wheel sets. these jobs of frame assembly, paint and final assembly are examples of what type of jobs?
These manufacturing jobs require skilled workers with specialized knowledge and expertise and are essential to the production of high-quality Co-Motion bicycles.
The jobs frame assembly, paint, and final assembly are examples of manufacturing jobs. Specifically, they are part of the production process involved in the manufacture of Co-Motion bicycles.
Frame assembly involves the skilled work of a single technician who uses high-quality aluminum tubes and intricate TIG welding to create a sturdy and durable frame. This job requires technical knowledge, attention to detail, and precision to ensure that the frame is both structurally sound and aesthetically pleasing.
Painting is another important step in the manufacturing process, and it involves applying custom colors to the frame to meet precise customer specifications. This job requires expertise in mixing colors and applying paint evenly to achieve a smooth finish.
Finally, the final assembly involves attaching a variety of specialized components, such as drive-train and steering components, and custom-built wheel sets to the frame to create a complete, functional bicycle. This job requires knowledge of the mechanical components of the bicycle and the ability to follow precise assembly instructions.
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MM Model with Zero Taxes Qulipen Company is unlevered and has a value of $25 billion. An otherwise identical but levered firm finances 45% of its capital structure with debt. Under the MM rero-tax model, what is the value of the levered firm? Enter your answer in billions. For example, an answer of $1 billion should be entered as 1, not 1,000,000,000. Round your answer to the nearest whole number 5.
The value of the levered firm under the MM zero-tax model is approximately $36 billion.
According to the MM zero-tax model, the value of the levered firm is equal to the value of the unlevered firm plus the tax shield value of debt. Since the tax rate is assumed to be zero in this scenario, the tax shield value of debt is simply the amount of debt multiplied by the cost of debt.
Let's assume that the cost of debt for the levered firm is 6% and the cost of equity for both the unlevered and levered firms is 10%. The capital structure of the levered firm is 45% debt and 55% equity. Therefore, the value of debt is:
Value of debt = 45% x Total value of levered firm
= 0.45 x ($25 billion + Value of debt)
Simplifying this equation, we get:
Value of debt = $11.11 billion
The tax shield value of debt is then:
Tax shield value of debt = Value of debt x Cost of debt
= $11.11 billion x 6%
= $0.67 billion
Therefore, the value of the levered firm is:
Value of levered firm = Value of unlevered firm + Tax shield value of debt
= $25 billion + $0.67 billion
= $25.67 billion
Rounding this to the nearest whole number 5, we get approximately $30 billion.
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Problem 1.8. Suppose you own 5,000 shares that are worth $25 each. How can put options be used to provide you with insurance against a decline in the value of your holding over the next four months? Y
One possible way to use put options to insure against a decline in the value of the shares you own is to buy put options with a strike price of $25 or slightly below that level.
How to put the optionsA put option gives you the right, but not the obligation, to sell the underlying asset (in this case, your shares) at the strike price.
If the share price falls below the strike price, the put option would become more valuable, as it allows you to sell the shares at a higher price than the market value.
The premium paid for the put option would act as a cost for the insurance, but it would limit your potential losses in case of a significant decline in the share price.
It's important to note that put options have expiration dates, so you would need to select an option with a time frame that matches your expected holding period.
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The proportioning valves used in typical brake systems can be:A) pressure-sensitive. B) load-sensitive. C) Both A and B D) None of the above.
The proportioning valves used in typical brake systems can be pressure-sensitive, load-sensitive or both. The correct option is C.
A pressure-sensitive proportioning valve is designed to balance the brake pressure between the front and rear brakes. This type of valve monitors the brake fluid pressure and reduces the pressure to the rear brakes if it exceeds a certain level. This is important because the front brakes typically provide more stopping power than the rear brakes, and an imbalance in pressure can cause the rear brakes to lock up and skid.
On the other hand, a load-sensitive proportioning valve is designed to adjust the brake pressure based on the weight distribution of the vehicle. This type of valve is usually found in vehicles with a high center of gravity or that are heavily loaded, such as trucks or SUVs. A load-sensitive valve reduces the pressure to the rear brakes if the weight of the vehicle shifts forward during braking. This helps prevent the rear wheels from locking up and losing traction.
Some proportioning valves are designed to be both pressure-sensitive and load-sensitive, providing a more precise balance of brake pressure in various driving conditions. However, not all brake systems use proportioning valves.
Some vehicles use a combination valve that combines the functions of the proportioning valve with the metering valve and brake warning switch. The combination valve is designed to control the distribution of brake pressure to the front and rear brakes while also warning the driver if there is a problem with the brake system.
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The cost of basket of goods in Year 1 is $200 and the cost of the basket of goods in Year 2 is $225. If Year 1 is used as base year, the Year 2 price index is: a) 80 b) 112.5 c) 66.67 d) 150
If Year 1 is used as base year, the Year 2 price index is 112.5. The correct option is b) 112.5.
To calculate the Year 2 price index, we need to use the formula:
Price index = (Cost of basket of goods in Year 2 / Cost of basket of goods in base year) x 100
Using the information given in the question, the cost of the basket of goods in Year 1 is $200 (base year) and the cost of the basket of goods in Year 2 is $225.
Substituting these values in the formula, we get:
Price index = ($225 / $200) x 100
Price index = 1.125 x 100
Price index = 112.5
Therefore, the Year 2 price index is 112.5, which means that the cost of the basket of goods has increased by 12.5% compared to the base year. The correct answer is b) 112.5.
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Abby also has a $400/month car loan payment and a $150/month student loan payment. If her lender requires that her Debt-to-Income ratio not exceed 43%, what does her annual gross income need to be to qualify for this loan?
Abby's annual gross income needs to be at least $41,860.44 to qualify for the loan, assuming she has no other debts.
To calculate the annual gross income required for Abby to qualify for this loan, we need to use the Debt-to-Income (DTI) ratio formula:
DTI ratio = (Total monthly debt payments / Monthly gross income) x 100%
We know that Abby's total monthly debt payments are $1,500 ($1,000 for the proposed mortgage, $400 for the car loan, and $150 for the student loan), and her DTI ratio cannot exceed 43%. So we can write:
43% = ($1,500 / Monthly gross income) x 100%
Solving for Monthly gross income:
Monthly gross income = $1,500 / (43% / 100%) = $3,488.37
To calculate the required annual gross income, we simply multiply the monthly gross income by 12:
Annual gross income = $3,488.37 x 12 = $41,860.44
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Ordinary shares in Company S are listed on the London Stock Exchange. Company T has announced a dividend of 32p per ordinary share for the current year. There will be only one dividend payable for the year. It is forecast that Company T will announce a dividend of 34p per ordinary share for next year and that there will be only one dividend payable for the year. Company T's shares have a market price of 274.56p Calculate Company T's cost of equity capital based on the information above. Give your answer as a percentage, without the percent sign, to 2 decimal places. For example, for 8.333% enter 8.33
The investors would require a return of at least 12.38% in order to invest in Company T's shares
To calculate Company T's cost of equity capital, we need to use the dividend discount model. This model assumes that the current market price of a share is equal to the present value of all future dividends. Therefore, we can use the following formula: Cost of Equity = (Dividend for next year / Market Price per share) + Growth Rate
Using the information provided, we can calculate the cost of equity as follows: Cost of Equity = (0.34 / 2.7456) + (0.034 / 2) ,Cost of Equity = 0.1238 or 12.38%
Therefore, Company T's cost of equity capital is 12.38%. This means that investors would require a return of at least 12.38% in order to invest in Company T's shares.
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A company decides to issue 1,000,000,000 shares of common stock and sells 500,000,000 of these shares to the public in an initial offering. The remainder of the shares are held as Treasury Stock. After the first day of trading, the shares are selling in the stock market for $8 per share. If the company immediately decides to split its common stock, 2 for 1:a. How many shares will be outstanding after the split?b. What will be the share price of the common?c. What will be the market value of the company after the split?
The number of shares outstanding after the split will be 1,000,000,000 outstanding shares.
The share price of the common shares would be $ 4 per share.
The market value of the compare after the split would be $ 8 billion.
How to find the number of shares ?After the split, the number of outstanding shares will double, since the split is 2 for 1. Therefore, there will be 500,000,000 x 2 = 1,000,000,000 outstanding shares.
After the split, the share price will be halved, since the total value of the company is still the same but the number of shares has doubled. Thus, the share price will be $8 / 2 = $4 per share.
The market value of the company will remain the same after the split, since the total value of the company is still $8 billion (1,000,000,000 shares x $8 per share). Therefore, the market value of the company after the split will still be $8 billion.
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assume that catherine has the preferences shown in the above table. also assume that the price of a can of pepsi is $3.00 and that the price of a slice of pizza is $2.00. if she has $16 available to spend, what combination of pepsi and pizza will be her consumer optimum?
Based on the preferences shown in the table, Catherine has a diminishing marginal rate of substitution between Pepsi and pizza, meaning she is willing to give up fewer slices of pizza for an additional can of Pepsi as she consumes more of each.
To find her consumer optimum, we need to find the combination of Pepsi and pizza that maximizes her utility given her budget constraint.
Let x be the quantity of Pepsi and y be the quantity of pizza that Catherine consumes. Then, we can set up the following optimization problem:
Maximize U(x,y) = 3x + 2y
Subject to 3x + 2y = 16
Solving this problem using Lagrange multipliers, we find that the optimal consumption bundle is (4,4), meaning Catherine should buy 4 cans of Pepsi and 4 slices of pizza to maximize her utility given her budget constraint. This combination costs $24, which is more than her available budget, so Catherine will need to make a trade-off between consuming less of each good or spending more than her budget.
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managers of international companies that are attempting to develop a competitive advantage faec a formidable challenge because
Managers of international companies that are attempting to develop competitive advantage face a formidable challenge because time, talent, and money are scarce.
An international company is an offshore entity created in accordance with the laws of some jurisdictions as a tax-neutral business that is typically restricted in terms of the activities it may engage in within the jurisdiction in which it is incorporated, though this is not always the case. An IBC or its owners may be subject to taxation in other jurisdictions even though they are not subject to taxation in the country where they were formed, for example, if they live in a nation with "controlled foreign corporation" laws.
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Project Evaluation Kolby's Korndogs is looking at a new sausage system with an installed cost of $655,000. This cost will be depreciated straight-line to zero over the project's five-year life, at the end of which the sausage system can be scrapped for $85,000. The sausage system will save the firm $183,000 per year in pretax operating costs, and the system requires an initial investment in net working capital of $35,000. If the tax rate is 22 percent and the discount rate is 8 percent, what is the NPV of this project?
Steps to calculate the NPV of this project: 1. Yearly Depreciation = 655,000 / 5 = $131,000; 2. 2. After-Tax Salvage Value to MV* (1 - Tc), 3. The salvage value after taxes is zero and equals 85,000* (1-.34), 4. After-Tax Salvage Value to $0 is $56,100.
Briefing:-5. OCF equals (Sales - Costs)(1 - TC) + (Depreciation).
\s6. OCF = (183,000.66) + (131,000.34) (131,000.34)
Cost to Start Production = Fixed Asset Investment - Net Working Capital Investment 7.
8. The cost to start production is $655,00 minus 35,000, or $690,000.
9. nap(8,-690000,{165320,165320,165320,165320,165320} = -$29,925.2
10. NPV is equal to -29,925.2 + [(Salvage Value + NWC) / (1 + r)t
11. NPV = -29,925.2 + [(56,100 + 35,000) / (1 + .08)^5]
12. NPV = -29,925.2 + 62,001.1
13. NPV = -29,925.2 + 62,001.1 = $32,075.90
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