FIN 305:Financial Management of the Business Enterprise (Fall 2014) Homework #2
Administration of the Enterprise Enterprise (Fall 2014)Homework #2
(Particular person, Due 10/16): Superior Current Worth Instruments1. If the low cost charge is 9%, then what
is the current worth of a $200 perpetuity with the primary cost in 4 years?
Recompute your reply assuming that the primary $200 cost grows at 6% per 12 months
eternally.2. What's the current worth of a 9-year
$400 annuity with the primary of the 9 funds immediately? The low cost charge is four%. Recompute your
reply assuming that the primary $400 cost grows at 2% per 12 months for the life
of the annuity.three. You estimate that by the point you
retire, you should have accrued $1.8mln in financial savings. If the rate of interest is four%
and you reside 30 years after retirement, what annual degree of expenditure will
these financial savings assist?four. Youâre saving
for retirement. You assume you want an
earnings of $80,000 per 12 months for 30 years after retirement and you've got 40 years
to go till retirement. How a lot cash would you could have saved immediately to
not have to contribute any more cash for the subsequent 40 years if the curiosity/funding
charge is eight% each earlier than and after retirement?5. A tasks
money flows are $100,000 per 12 months from years 1 by means of 6. Between years 6 and seven these money start to
develop at 5%. You anticipate this progress to
proceed eternally. What's the current
worth (at time zero) of the projectâs money flows if the chance price of
capital is 9%?6. It's
December 2015 and you're serious about whether or not to start out a Masterâs program or
start work come Jan. 1. Both approach, you intend to work for 30 years earlier than
retiring (so you'll retire a 12 months earlier in case you donât go to high school).When you had been to
begin work now you anticipate your beginning wage to be $50,000. Because of the poor
financial system you donât foresee a elevate for the primary three years, however after the third
12 months you anticipate to get a 15% elevate. You anticipate one other 25% elevate after the 10th
12 months and fixed wage after that.The masterâs
program prices $70,000 (paid once you begin) and takes precisely 1 12 months. With a
masterâs diploma you imagine that your beginning wage will probably be $65,000 per 12 months.
You additionally assume that you'll study some abilities that may improve your
bargaining energy in wage negotiations. Thus, you imagine that in case you get a
Masters your wage will develop steadily at three% per 12 months to your total working
low cost charge is 10% and that every one wages are paid on the finish of the 12 months, what
is the distinction in current worth between your wages going to high school and never
going to high school? If all you care about are these wages must you go to high school?
What's the most you'd be keen to pay for varsity underneath the wage
assumptions in the issue?
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