Corporate Finance: A Focused Approach (mindtap Course List)
7th Edition
ISBN: 9781337909747
Author: Michael C. Ehrhardt, Eugene F. Brigham
Publisher: South-Western College Pub
expand_more
expand_more
format_list_bulleted
Videos
Question
Chapter 4, Problem 4MC
Summary Introduction
To Determine: The interest rate earned.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
Assume that you are nearing graduation and have applied for a job at a prestigious com-
pany. The company's evaluation process requires you to take an examination that covers
several financial analysis techniques. The first section of the test addresses discounted
cash flow analysis. See how you would do by answering the following questions.
a. Draw time lines for (1) a $100 lump sum cash flow at the end of Year 2, (2) an or-
dinary annuity of $100 per year for 3 years, and (3) an uneven cash flow stream of
-$50, $100, $75, and $50 at the end of Years 0 through 3.
b. (1) What's the future value of an initial $100 after 3 years if it is invested in an ac-
count paying 10% annual interest?
(2) What's the present value of $100 to be received in 3 years if the appropriate inter-
est rate is 10%?
c. We sometimes need to find out how long it will take a sum of money (or something
else, such as earnings, population, or prices) to grow to some specified amount. For
example, if a company's…
A bank is considering offering a loan of
$100,000 to a client. If the loan is not offered,
then the bank invests the $100,000 receives a
sure payoff from the investment of $200 (i.e.,
receives $100,200 at the end of the year).
Prior to a decision of whether or not to offer
the loan, the bank can run a credit analysis on
the client that returns one of two possible
predictions: (1) the client will default on the
loan in which case the bank would lose
$100,000, (2) the client will pay back the loan
with interest in which case the bank receives a
payoff of $6,000 (i.e., receives $106,000 at the
end of the year). The probability that the
credit analysis will return the first prediction
(client defaults) is 1%. What is the EVPI?
What is the excel function and formula for this question?
Off-The-Books Investment Firm, LLC, has offered you an investment it says will return to you $20,000 in 2 years. To get in, you'll need to make a $10,000 deposit to their receivables account and promise not to tell anyone about it. What is the annual return on this investment?
Chapter 4 Solutions
Corporate Finance: A Focused Approach (mindtap Course List)
Ch. 4 - Prob. 1QCh. 4 - Prob. 2QCh. 4 - An annuity is defined as a series of payments of a...Ch. 4 - If a firms earnings per share grew from 1 to 2...Ch. 4 - Prob. 5QCh. 4 - Prob. 1PCh. 4 - Prob. 2PCh. 4 - Prob. 3PCh. 4 - Prob. 4PCh. 4 - Prob. 5P
Ch. 4 - Prob. 6PCh. 4 - An investment will pay 100 at the end of each of...Ch. 4 - You want to buy a car, and a local bank will lend...Ch. 4 - Find the following values, using the equations,...Ch. 4 - Prob. 10PCh. 4 - Prob. 11PCh. 4 - Find the future value of the following annuities....Ch. 4 - Prob. 13PCh. 4 - Prob. 14PCh. 4 - Prob. 15PCh. 4 - Prob. 16PCh. 4 - Prob. 17PCh. 4 - Prob. 18PCh. 4 - Universal Bank pays 7% interest, compounded...Ch. 4 - Prob. 20PCh. 4 - Prob. 21PCh. 4 - Prob. 22PCh. 4 - A mortgage company offers to lend you 85,000; the...Ch. 4 - Prob. 24PCh. 4 - Prob. 25PCh. 4 - Prob. 26PCh. 4 - Prob. 27PCh. 4 - Prob. 28PCh. 4 - Prob. 29PCh. 4 - Your company is planning to borrow 1 million on a...Ch. 4 - It is now January 1. You plan to make a total of 5...Ch. 4 - Prob. 32PCh. 4 - Prob. 33PCh. 4 - You want to accumulate 1 million by your...Ch. 4 - Prob. 1MCCh. 4 - Prob. 2MCCh. 4 - Prob. 3MCCh. 4 - Prob. 4MCCh. 4 - Prob. 5MCCh. 4 - Prob. 6MCCh. 4 - Prob. 7MCCh. 4 - Prob. 8MCCh. 4 - Prob. 9MCCh. 4 - Prob. 10MCCh. 4 - Prob. 11MCCh. 4 - Prob. 12MCCh. 4 - Prob. 13MC
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.Similar questions
- In the provided scenario, you address the time value of money also known as discounted cash flow analysis. This type of analysis is crucial to being able to viably analyze financial statements. The start - up firm you founded is trying to save $10, 000 in order to buy a parcel of land for a proposed small warehouse expansion. In order to do so, your finance manager is authorized to make deposits of S 1250 per year into the company account that is paying 12% annual interest. The last deposit will be less than $1250 if less is needed to reach $10,000. How many years will it take to reach the $10,000 goal and how large will the last deposit be? Show your workarrow_forwardFor the following economic calculations, write the factors (multipliers) that should be used,in (i) using the parameter values, and in (ii) calculate the result by showing your computations. Write the results you find in the spaces left. (Use factors for your calculations.)EXAMPLE: If you deposit $ 100 to a bank account that earns 8% annual interest, how much money will you have in this account after five years?(i)(F/P, 8%, 5) (ii)146.93100 * (F/P, 8%, 5) = 100 * 1.4693 = 146.93 TLa. You plan to take a credit with $1500 installment size per year with an annual interest rate of 8% over six years from a bank. What is the amount of your current credit?(i) (ii)b. A bank is required to deposit money for four years with an interest rate 10%. The money deposited at the end of the first year is 6000 TL and the amount of money deposited in the next three years will be reduced by 500 TL every year. How much money will be in the bank at the end of the fourth year?(i) (ii)arrow_forwardWrite your answer on clean paper, show your solution clearly and readable, and then Box your final answer. Take note: Give what is asked and show your answer.arrow_forward
- If you are attempting these questions ...then solve for both imagesarrow_forwardSolve for each problems. Show your solution legible and neatly. Write the question, the given(also what is the given?), what to find and a cash flow diagram. Answers should be in 2 decimal places, unless stated otherwise. Solution should be hand-written. Question can be hand-written or type-written. Answer should be in 2 decimal places. A man borrowed P300,000 from a bank and agreed to pay the loan at the end of a month. The bank discount the loan and give him P250,000. What is the rate of discount?arrow_forwardAn investor has accumulated $4,450 and is looking for the best rate of return that can be earned over the next year. A bank savings account will pay 9%. A one-year bank certificate of deposit will pay 11%, but the minimum investment is $7,450. Required: a. Calculate the amount of return the investor would earn if the $4,450 were invested for one year at 9%. b. Calculate the net amount of return the investor would earn if $3,000 were borrowed at a cost of 19%, and then $7,450 were invested for one year at 11%. c. Calculate the net rate of return on the investment of $4,450 if the investor accepts the strategy of part b. Note: Round your answer to 2 decimal places. a. Amount of return b. Net amount of return c. Net rate of return %arrow_forward
- An investor has accumulated $6,800 and is looking for the best rate of return that can be earned over the next year. A bank savings account will pay 5%. A one-year bank certificate of deposit will pay 7%, but the minimum investment is $9,800. Required: Calculate the amount of return the investor would earn if the $6,800 were invested for one year at 5%. Calculate the net amount of return the investor would earn if $3,000 were borrowed at a cost of 15%, and then $9,800 were invested for one year at 7%. Calculate the net rate of return on the investment of $6,800 if the investor accepts the strategy of part b. Note: Round your answer to 2 decimal places.arrow_forwardAssume that your team is in business and you must borrow $6,000 cash for short-term needs. You have been shopping banks for a loan, and you have the following two options. A. Sign a $6,000, 90-day, 10% interest-bearing note dated June 1. B. Sign a $6,000, 120-day, 8% interest-bearing note dated June 1. Required 1. Discuss these two options and determine the better choice. Ensure that all teammates concur with the decision and understand the rationale. 2. Each member of the team is to prepare one of the following journal entries. a. Option A—at date of issuance. b. Option B—at date of issuance. c. Option A—at maturity date. d. Option B—at maturity date. 3. In rotation, each member is to explain to the team the entry he or she prepared in part 2. Ensure that all team members concur with and understand the entries. 4. Assume that the funds are borrowed on December 1 (instead of June 1) and your business operates on a calendar-year reporting period. Each member of the team is to prepare…arrow_forwardYou plan to borrow $1,000 from a bank. In exchange for $1,000 today, you promise to pay $1,130 in one year What does the cash flow timeline look like from your perspective? What does it look like from the bank's perspective? What does the cash flow timeline look like from your perspective? (Select the best choice below) O A. Period 0 1 CHEarrow_forward
- Please give me detailed answer with formula, dont use Excel!arrow_forwardUse the present value and future value tables to answer the following questions. Time Value of Money - Principles of Accounting, Volume 2: Managerial Accounting | OpenStax A. If you would like to accumulate $2,400 over the next 5 years when the interest rate is 15%, how much do you need to deposit in the account? $_____ B. If you place $6,200 in a savings account, how much will you have at the end of 6 years with a 12% interest rate? $_____ C. You invest $7,000 per year for 11 years at 12% interest, how much will you have at the end of 11 years? $_____ D. You win the lottery and can either receive $760,000 as a lump sum or $60,000 per year for 19 years. Assuming you can earn 8% interest, which do you recommend and why? _____arrow_forwardPlease kindly give me all right answers..help me??? Note: I have other tutors don't copy from other websites. Thank youarrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Principles of Accounting Volume 1AccountingISBN:9781947172685Author:OpenStaxPublisher:OpenStax College
Principles of Accounting Volume 1
Accounting
ISBN:9781947172685
Author:OpenStax
Publisher:OpenStax College
7.2 Ch 7: Notes Payable and Interest, Revenue recognition explained; Author: Accounting Prof - making it easy, The finance storyteller;https://www.youtube.com/watch?v=wMC3wCdPnRg;License: Standard YouTube License, CC-BY