Essentials of Corporate Finance (Mcgraw-hill/Irwin Series in Finance, Insurance, and Real Estate)
Essentials of Corporate Finance (Mcgraw-hill/Irwin Series in Finance, Insurance, and Real Estate)
9th Edition
ISBN: 9781259277214
Author: Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Bradford D Jordan Professor
Publisher: McGraw-Hill Education
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Chapter 4, Problem 26QP

Calculating Future Values. You have $20,000 you want to invest for the next 40 years. You are offered an investment plan that will pay you 7 percent per year for the next 20 years and 11 percent per year for the last 20 years. How much will you have at the end of the 40 years? Does it matter if the investment plan pays you 11 percent per year for the first 20 years and 7 percent per year for the next 20 years? Why or why not?

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(Use Calulator or Formula Approach) You are offered the opportunity to put some money away for retirement. You will receive five annual payments of $25,000 each beginning in 40 years. How much would you be willing to invest today if you desire an interest rate of 12%?
Answer these essay questions. Be sure to show your work. Calculating Future Values 1. You have $35,000 you want to invest for the next 20 years to help with retirement. An investment plan is presented with a 9% payout over the first 10 years, followed by a 15% payout for the final 10 years. What is the total at the end of the full 20 years? Share how your calculations. Would the amount be different if it paid you 15% per year for the first 10 years and 9% per year for the next 10 years? Explain why or why not? 2. Finding the time necessary until you pay off a loan is simple if you make equal payments each month. However, when paying off credit cards many individuals only make the minimum monthly payment, which is generally 1% to 2% of the balance or $25 whichever is greater. Locate the credit card calculator at www.fincalc.com and work out this exercise: a) You currently owe $25,000 on a credit card with a 16% interest rate and a minimum payment of $25 or 1% of your balance. b) How…

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Essentials of Corporate Finance (Mcgraw-hill/Irwin Series in Finance, Insurance, and Real Estate)

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