FIN 305:Financial Management of the Business Enterprise (Fall 2014) Homework #2
FIN 305:Monetary 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. You’re 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 project’s 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 Master’s 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 don’t 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 don’t 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 master’s program prices $70,000 (paid once you begin) and takes precisely 1 12 months. With a master’s 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 life.Assuming the 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?