today‚ and a final payment of $25‚000 on the day you leave two years from today. What is the cost of this vacation in today’s dollars if the discount rate is 6%? 2. The tax rates are as shown. Your firm currently has taxable income of $79‚000. How much additional tax will you owe if you increase your taxable income by $30‚000? Taxable Income Tax Rate $ 0 - 50‚000 15% 50‚001 - 75‚000 25% 75‚001 - 100‚000 34% 100‚001 - 335‚000 39% 3. You are the beneficiary of a life insurance policy
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Boston’s bequest‚ which was equivalent to about $4‚600‚ had ballooned to $332‚000 by 1890. a. Determine the equivalent annual rate of return between 1790 and 1890. b. If the city of Boston had left this bequest in a fund earning 5% per year between 1890 and 1990‚ what would have been the value of the fund in 1990? 2. Here is a series of cash flows with an interest rate of 8% per period: End of period 1-5 6-10 Project X $1000 2000 Project Y $2‚000 1‚000 a. Find the equivalent present values of
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their probabilities and associated outcomes. RETURNS ON ALTERNATIVE INVESTMENTS ESTIMATED RATE OF RETURN State Of the Economy Probability T-bills High Tech Collections U.S. Rubber Market Portfolio 2-stock-portfolio Recession 0.1 5.5% -27.0% 27% 6% -17% 0% Below Average 0.2 5.5% -7% 13% -14% -3% Average 0.4 5.5% 15% 0 3% 10% 7.50% Above Average 0.2 5.5% 30% -11% 41% 25% Boom 0.1 5.5% 45% -21% 26% 38% 12% r(hat) - expected return 1.00% 9.80% 10.50% σ (std deviation) 0.0%
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BY :SUMIT JAIN EMAIL:vaibhav4u38@rediffmail.com CHAPTER ONE FINANCIAL MANAGEMENT : AN OVERVIEW |Question : What do you mean by financial management ? | Answer : Meaning of Financial Management : The primary task of a Chartered Accountant is to deal with funds‚ ’Management of Funds’ is an important aspect of financial management in a business
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work‚ as partial credit will be given for each question’s answer. Organize your work so it is easy to follow. You can use word‚ power point‚ excel or combinations of the above. 6) Return the Solutions pages to be graded. Put a copy in the course folder and send me an electronic copy that I will grade and return to you along with the approved solution. 7) The exercise is worth 100 points. 8) GOOD LUCK Name: ________________________________ 1) You are
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the above formula‚ R is the net cash inflow expected to be received each period; i is the required rate of return per period; n are the number of periods during which the project is expected to operate and generate cash inflows. When cash inflows are uneven: NPV = R1 + R2 + R3 + ... − Initial Investment (1 + i)1 (1 + i)2 (1 + i)3 Where‚ i is the target rate of return per period; R1 is the net cash inflow during the first period; R2 is the net cash inflow during the
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discount rate and gives as output a price; the opposite process — taking cash flows and a price and inferring a discount rate‚ is called the yield. Discounted cash flow analysis is widely used in investment finance‚ real estate development‚ and corporate financial management. Discount rate Main article: Discounting The most widely used method of discounting is exponential discounting‚ which values future cash flows as "how much money would have to be invested currently‚ at a given rate of return‚ to yield
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investment Y because only the expected returns matters to the company not the risk that is required. b. If she were risk-averse‚ which investments would she select? Why? Sharon would choose investment X because the expected returns must increase for the company if the risk goes up c. If she were risk-seeking‚ which investments would she select? Why? Sharon would choose investment Z because to the company there is an acceptable decrease in return if the risk increases. d. Given the
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value and internal rate of return and payback period. In analysing the following investments I have not taken into account the effects of taxation Ranking of investments Investment 3 has the best rating using the three analysis tools‚ the initial investment is paid back after 5.05 years‚ followed by investment 2 Limitations of analysis using NPV‚ IRR and PP The results given from Net present value are affected by the discount rate and we have to assume that the rate will be the same over
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that the Return on Investment was as follows: |1993 |1994 |1995 |1996 |1997 |1998 |1999 |2000 |2001 |2002 |2003 | |Return on Investment % |-0.4 |5.2 |11.9 |11.5 |14.7 |12 |11.1 |6.4 |-6.5 |-9.6 |-0.3 | | In reviewing the company’s Return on Investment‚ we can see an increased in the Airline Return on Investment in 1993 the return on investment was a negative 0.4 in 1994 the return on investment became positive at 5.2 ;and in 1995 the return on investment was 11.9‚ for 1996 the return on investment
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