To retain high-performing engineers, a large semiconductor company provides corporate stock as part of the compensation package. In one particular year, the company offered 1000 shares of either class A or class B stock. The class A stock was selling for Php2000 per share at the time, and stock market analysts predicted that it would increase at a rate of 5% per year for the next 5 years. Class B stock was selling for Php1500 per share, but its price was expected to increase by 10% per year. At an interest rate of 8% per year, which stock should the engineers select on the basis of a present worth analysis and a 5-year planning horizon? Create the cash-flow diagram.

To retain high-performing engineers, a large semiconductor company provides corporate stock as part of the compensation package. In one particular year, the company offered 1000 shares of either class A or class B stock. The class A stock was selling for Php2000 per share at the time, and stock market analysts predicted that it would increase at a rate of 5% per year for the next 5 years. Class B stock was selling for Php1500 per share, but its price was expected to increase by 10% per year. At an interest rate of 8% per year, which stock should the engineers select on the basis of a present worth analysis and a 5-year planning horizon? Create the cash-flow diagram.

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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4. Hughes Cable Systems plans to offer its employees a salary enhancement package that has revenue sharing as its main component. Specifically, the company will set aside I % of total sales for yearend bonuses for all its employees. The sales are expected to be $5 million the first year, $6 million the second year, and amounts increasing by 20% each year for the next 5 years. At an interest rate of 10% per year, what is the equivalent annual worth in years I through 5 of the bonus package?
You are evaluating the purchase of Bell, Inc. common stock that just paid a dividend of $4.60. You expect the dividend to grow at a rate of 10% for the next four years. You plan to hold the stock for four years and then sell it. You estimate the price of the company’s stock to rise to $59.37 at the end of your four-year holding period. A required rate of return of 13% will be adequate compensation for this investment. Given your assumptions, what is the current value of Bell stock? Round to the nearest $0.01 (allow a couple of pennies of rounding). answer is 53.62
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A company has a policy of requiring a rate of return on investment of 13%. Two investment alternatives are available but the company may choose only one. Alternative 1 offers a return of $30,000 at the end of year three, $60,000 at the end of year nine and $40,000 after eleven years. Alternative 2 will return the company $500 at the end of each month for the next eleven years. Compute the present value of each alternative and determine the preferred alternative according to the discounted cash flow criterion.
Swifty Corporation is involved in the business of injection molding of plastics. It is considering the purchase of a new computer-aided design and manufacturing machine for $435,000. The company believes that with this new machine it will improve productivity and increase quality, resulting in an increase in net annual cash flows of $105,803 for the next 6 years. Management requires a 10% rate of return on all new investments. Click here to view PV table.Calculate the internal rate of return on this new machine. (Round answer to 0 decimal places, e.g. 13%. For calculation purposes, use 5 decimal places as displayed in the factor table provided.) Internal rate of return %

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