WACC. Eric has another get-rich-quick idea, but needs funding to support it. He chooses an all-debt funding scenario. He will borrow $1,630 from Wendy, who will charge him 9% on the loan. He will also borrow $1,384 from Bebe, who will charge him 11% on the loan, and $986 from Shelly, who will charge him 17% on the loan. What is the weighted average cost of capital for Eric? What is the weighted average cost of capital for Eric? O% (Round to two decimal places.)

WACC. Eric has another get-rich-quick idea, but needs funding to support it. He chooses an all-debt funding scenario. He will borrow $1,630 from Wendy, who will charge him 9% on the loan. He will also borrow $1,384 from Bebe, who will charge him 11% on the loan, and $986 from Shelly, who will charge him 17% on the loan. What is the weighted average cost of capital for Eric? What is the weighted average cost of capital for Eric? O% (Round to two decimal places.)

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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WACC. Eric has another get-rich-quick idea, but needs funding to support it. He chooses an all-debt funding scenario. He will borrow $4,960 from Wendy, who will charge him 7% on the loan. He will also borrow $4,613 from Bebe, who will charge him 9% on the loan, and $2,427 from Shelly, who will charge him 15% on the loan. What is the weighted average cost of capital for Eric? What is the weighted average cost of capital for Eric? 10.33% (Round to two decimal places.)
Mrs. John wants to take the next three years off work to travel around the world. She estimates herannual cash needs at $20,000. Mrs. John believes she can invest her savings at 10% until she depletesher funds. Table factor at 10% is 4.883 and at 7% is 4.152To find out how much she should invest now to fund her future cash flow if she invests at 10%. Or whatto invest if only earn 7 %.( Present value of annuity)
Debby's Dance Studios is considering the purchase of new sound equipment that will enhance the popularity of its aerobics dancing. The equipment will cost $15,500. Debby is not sure how many members the new equipment will attract, but she estimates that her increased annual cash flows for each of the next five years will have the following probability distribution. Debby's cost of capital is 13 percent. Use Appendix D for an approximate answer but calculate your final answers using the formula and financial calculator methods. Cash Flow $ 4,390 5,110 8,240 10,000 Probability 0.3 0.2 0.3 0.2 a. What is the expected value of the cash flow? The value you compute will apply to each of the five years. Expected cash flow b. What is the expected net present value? Note: Negative amount should be indicated by a minus sign. Do not round intermediate calculations and round your answer to 2 decimal places. Net present value
Linda is taking out an amortized loan for $91,000 to open a small business and is deciding between the offers from two lenders.She wants to know which one would be the better deal over the life of the small business loan, and by how much.Answer each part. Do not round intermediate computations, and round your answers to the nearest cent.If necessary, refer to the list of financial formulas. (a) AngeHer credit union has offered her a 8-year small business loan at an annual interest rate of 13.3%. Find the monthly payment.X(b)A savings and loan association has offered her a 9-year small business loan at an annual interest rate of 13.5 %. Find the monthly payment.Suppose Linda pays the monthly payment each month for the full term. Which lender's small business loan would have the lowest total amount to pay off, and by how much? Gredit unionThe total amount paid would be $ less than to the savings and loan association.Try againvings and loan association he total amount paid would be $less…
The Jeffersons have asked you what would be needed to fund the children’s future college costs. Assume each child will begin college at age 18 and graduate in four years. Assume current costs are $24,000 per year and are expected to increase by 5% per year and investments earn 7%. A. Assuming no existing assets are dedicated to college, what is the annual savings amount required to fund the children’s education? The Jeffersons’ goal is to have an amount at the beginning of the freshman year for each child that is sufficient to fund a serial payment covering the $24,000 of current costs of college adjusted for inflation for each of the four years of college. Please include your calculator keystroke inputs [PV, I/YR, N, FV, and PMT (if needed)] for each step of this calculation. Also include whether any PMTs are in the end mode or the begin mode. B. What would you say to the Jeffersons about their education funding situation? Write a script of a single paragraph as if you…
Shashin has 4P dollars that he wants to invest in a savings account earning an interest rate of r at the end of every two weeks. Nimish suggests an alternative: that Shashin instead open four different savings accounts with the bank (all earning the same rate, r at the end of every two weeks), and invest P dollars into each of them. This way Shashin can take advantage of the great interest rate even more! Help Shashin determine which strategy to adopt.
Kindly assist on questions below. (1) A person has wealth of $ 40000. If they have an accident they mush spend $ 30000 on car repairs. Their utility function is given by U = w1/2 where w is equal to their wealth . They do not get into an accident with 90% chance and they get into an accident with 10 % chance. What is the total fair premium for full insurance for this person. (2) Risk pooling can decrease risk if: a) Risks are independent b) risks are dependent c) enough people pool their risk d) if the amount if risk is small enough e) if people have different risk preferences
Jamie Lee and Ross agree that by accomplishing their short goals, they can budget $5,000 a year towards their long-term investment goals. They are estimating that with the allocations recommended by their financial advisor, they will see an average of 7 percent on their investments. The triplets will begin college in 15 years and will need $100,000 for tuition. Using the Time Value of Money calculations, decide if Jamie Lee and Ross will be on track to reaching their long-term financial goals of having enough money from their investments to pay the triplets’ tuition.

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