"Rate Of Return" Essays and Research Papers

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Chapter 4 Finance Analysis

Chapter 4 29. Annuity Present Values What is the value today of a 15-year annuity that pays $500 a year?The annuity’s first payment occurs at the end of year 6. The annual interest rate is 12 percentfor years 1 through 5, and 15 percent thereafter. (Ross, Stephen A.. Corporate Finance, 8th Edition. Irwin/McGraw-Hill, 112006. 4.8). 33. Growing Annuity Southern California Publishing Company is trying to decide whether to revise its popular textbook, Financial Psychoanalysis Made Simple. The company...

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Net Present Value and Initial Cash Outlay

Week 5 – Homework Answers P8-1. Suppose that a 30-year U.S. Treasury bond offers a 4% coupon rate, paid semiannually. The market price of the bond is $1,000, equal to its par value. a. What is the payback period for this bond? b. With such a long payback period, is the bond a bad investment? c. What is the discounted payback period for the bond assuming its 4% coupon rate is the required return? What general principle does this example illustrate regarding a project’s life, its discounted payback...

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Flirting with Risk

Bill. How would you explain to Mary the relationship between risk and return of individual stocks? As the risk increases the potential return increases as well. In order to get higher returns one needs to invest in riskier assets. In other words, risk is the probability of negative outcome and return is the compensation for this risk. 2. Mary has no idea what beta means and how it is related to the required return of the stocks. Explain how you would help her understand these topics...

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Net Present Value and Discount Rate

cost the amount of $ 60,000. The discount rate is 10%. The cash flows before depreciation and tax are as follows: Year Proposal A Proposal B $ $ 0 (60,000) (60,000) 1 18,000 19,000 2 15,000 17,000 3 18,000 19,000 4 16,000 14,000 5 19,000 15,000 6 14,000 13,000 Evaluate the above proposals according to: 1. Pay Back Period. 2. Accounting Rate of Return (ARR) 3. Net present value method (NPV) ...

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Ameritrade Cost of Capital

Investor appear to be the comparable firms. 2. Find the risk-free rate. To determine the risk free rate, match the economic life of the project. Considering a significant investment in technology and the goal of the company to be the largest brokerage firm, the project that we are considering is a long term project. Thus, we may use the prevailing yield of 10-year bonds. (See Exhibit 3) Risk Free rate= 6.34% 3. Find the market-risk premium We use the difference between...

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Critical Thinking Questions 61 Identify The

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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facd

insurance premium compute the rental return on property investment 2 Selection Criteria of Mortgage Loan  The following factors should be considered when choosing mortgage loan plan: 1. Interest Rate 2. Borrowing Period 3. Installment Loan Repayments 4. Cash Rebate 3 Interest Rate In Hong Kong’s mortgage loan market, there are three different forms of borrowing rates: 1. Floating rate 2. HIBOR-based rate 3. Fixed floating (adjustable) rate 4 Borrowing Period   ...

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Eva vs Roi

earnings, operating profit etc. Equity investors should earn on their capital a return far over risk-free interest rate in order to induce and maintain capital in the company Therefore earnings should always be judged against the capital used to produce these earnings Earnings can be easily increased simultaneously worsening the position of shareholders e.g. if more capital is poured into! company although the return on capital is 5% or less (even lower than long-term government bond) Thus it is...

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Week 9

etc.), value is created by how you finance a project. False. True. Question 2 (5 points) The return on equity is equal to the return on assets of a project/firm. Never true. Sometimes true. Always true. Question 3 (10 points) Suppose the expected returns on equity of two firms, Macrosoft and Microsoft, that operate in the same industry are 10.50% and 12.60%, respectively. What is the return on assets in this business if Macrosoft has no debt? (Enter the answer with no more nor less than...

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Cost of Capital at Ameritrade

assessing the reasonableness of the investment, mainly considering the estimate internal return rate comparing with the weighted average cost of capital. The key factor will be the WACC, the higher rate of WACC, the higher risk for the investment. Based on our assessment which detail stated as below, we learnt that the cost of capital for Ameritrade is very high (around 25%) based on the assumptions we used, hereby we rate the investment risk at high level. Key assumptions used: - Long term investment...

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