Problem 1 Answer the following questions. You must show all your work on how you came up with your answer to earn credit. How much will $25,000 grow to in five years at a 5% annual rate that is compounded quarterly? Problem 2 If Eisenberg Industries revenues have increased from $30 million to $90 million over a 10-year period, what has been their annual rate of growth? Problem 3 Use four decimal places on time value of money factors unless otherwise specified. Approximations and minor differences because of rounding are acceptable. Ignore the effect of taxes. Assume that all percentages are annual rates and that compounding occurs annually unless indicated otherwise. You must show your work for your calculations. Bill will receive a royalty payment of $18,000 per year for the next 25 years, beginning one year from now, as a result of a book he has written. If a discount rate of 10 percent is applied, should he be willing to sell out his future rights now for $160,000? How about $162,500? $165,000? Problem 4 You are offered a business partnership that guarantees you cash returns of $150,000 one year from now, nothing at the end of year 2, and $350,000 at the end of year 3. After year 3, the partnership will be dissolved, and there will be no more expected returns on your investment. If you analyze this plan expecting 7% compounded annually, what is this potential deal worth to you today? Problem 5 Three years ago, Petty Partners Inc. issued 15-year, $1,000 bonds that are currently priced at $911.37. If the prevailing rate of return on similar investments is 5%, what is the coupon rate on Petty Partners bonds, and what is the annual interest payment?
Problem 1
Answer the following questions. You must show all your work on how you came up with your answer to earn credit.
How much will $25,000 grow to in five years at a 5% annual rate that is compounded quarterly?
Problem 2
If Eisenberg Industries revenues have increased from $30 million to $90 million over a 10-year period, what has been their annual rate of growth?
Problem 3
Use four decimal places on time value of money factors unless otherwise specified. Approximations and minor differences because of rounding are acceptable. Ignore the effect of taxes. Assume that all percentages are annual rates and that compounding occurs annually unless indicated otherwise. You must show your work for your calculations.
Bill will receive a royalty payment of $18,000 per year for the next 25 years, beginning one year from now, as a result of a book he has written. If a discount rate of 10 percent is applied, should he be willing to sell out his future rights now for $160,000? How about $162,500? $165,000?
Problem 4
You are offered a business
Problem 5
Three years ago, Petty Partners Inc. issued 15-year, $1,000 bonds that are currently priced at $911.37. If the prevailing rate of return on similar investments is 5%, what is the coupon rate on Petty Partners bonds, and what is the annual interest payment?
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