coated furniture. Budget: With the use of an account budget Guillermo can project required labor hours‚ product cost‚ and expected return. This type of income information can provide comparative figures of expected profit for the different business options. In the case of the three business options available to Guillermo‚ he can assess the net revenue and return on investment to help him decide which option will be more profitable for the business. Performance Report: A performance report can
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involved in computing the future value when you have multiple cash flows. First‚ prepare a time line to identify the size and timing of the cash flows. Second‚ calculate the present value of each individual cash flow using an appropriate discount rate. Finally‚ add up the present values of the individual cash flows to obtain the present value of a cash flow stream. This approach is especially useful in the real world where the cash flows for each period are not the same. 6.2 What is the key economic
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relevant discount rate is 9%‚ how much is the fund worth today? We know‚ Present Value = Future Cash Flow / (1 + Required Rate of Return) ^Number of Years You Have To Wait For The Cash Flow Given‚ Present value = $150‚000 / (1 + .09) ^ 11 = $150‚000 / 2.5804 = $ 58‚130 Therefore‚ The present value is thus about $58‚130. Calculating Rates of Return You’ve been offered an investment that will double your money in 10 years. What rate of return are you being
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can get the information about the variations in the return on invested capital earned by the industry over the several decades. In sulphur industry‚ the return on invested capital was around 15% from 1940 to 1945. From 1946‚ rate of return began to increase dramatically‚ starting from 16.2 %( 1945)‚ and reached 33.8% in 1950. This high rate of return kept for couples of years (1951-1955)‚ ranging from 29% to 31%. Starting from 1956‚ rate of return on invested capital in sulphur industry dropped sharply
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PVIFA= 30 periods‚ 11% Rate = 8.693793 Annuity= 20‚000 / Present value = $173‚876 = 20000 X 8.693793 Answer= $ 173‚876 Retirement money required b. How much will you need today as a single amount to provide the fund calculated in part A if you earn only 9% per year during the 20 years preceding retirement? n= 20 r= 9.00% FVIF= 20 periods‚ 9% = 5.604411 Amount required in 20 years = $ 173‚876 Amount to be invested = $ 31‚025 c. What effect would an increase in the rate you can earn both during
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Problems on Risk and Return 1) Using the following returns‚ calculate the arithmetic average returns‚ the variances and the standard deviations for X and Y. Year X Y 1 8% 16% 2 21 38 3 17 14 4 -16 -21 5 9 26 2) You bought one of the Great White Shark Repellant Co’s 8 per cent coupon bonds one year ago for $1030. These bonds make annual payments and mature six years from now. Suppose you decide to sell your bonds today ‚when the required return on the bonds is 7 per cent
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Risk and Return Copyright © 1996-2006 Investment Analytics 1 Time Value of Money Simple vs compound interest Daycount methods Discounting principles Copyright © 1996-2006 Investment Analytics Portfolio Management – Risk & Return Slide: 2 Time Value of Money Basic principle Money received today is different from money received in the future This difference in value is called the time value of money When we borrow or lend‚ this difference is reflected by the interest rate Copyright
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the purpose to examine the relationship between EVA and the company performance in Malaysia. The study indicates that EVA has a strong relationship with stock return as compared to other measures due to its focus on long-term performance. EVA enhances stock performances by including more informational content in describing the stock returns. According to the study‚ EVA is considered as a better alternative to other traditional valuation tools such as EPS‚ ROE‚ etc. Its characteristic of transparency
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interest rates unexpectedly. The rate of inflation is higher than expected. None of the above. 3. What do you call the portion of your total return on a stock investment that is caused by an increase in the value of the stock. Dividend yield. Risk-free return. Capital gain. None of the above. 4. What is one
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probabilities of the rates of return on this stock over the next year is summarized in the table below. |Rate of return |Less than -10% |-10% to 0% |0% to 10% |10% to 20% |More than 20% | |Probability |0.04 |0.14 |0.28 |0.33 |0.21 | Let A be the event “Rate of return will be more than 10%‚” and B be the event “Rate of return will be negative
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