Corporate Finance (4th Edition) (Pearson Series in Finance) - Standalone book
4th Edition
ISBN: 9780134083278
Author: Jonathan Berk, Peter DeMarzo
Publisher: PEARSON
expand_more
expand_more
format_list_bulleted
Question
Chapter 7.3, Problem 2CC
Summary Introduction
To determine: The rule to be followed by Person X if the payback rule does not give the same answer as the
Introduction:
NPV helps to make capital budget decisions. It would choose an alternative or an investment to increase the value of an enterprise. Using NPV, the net benefit of an organization can be calculated by subtracting the
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
Suppose that you are a U.S.-based importer of goods from the United Kingdom. You expect the value of the pound to increase against the U.S. dollar over the next 30 days. You will be making payment on a shipment of imported goods in 30 days and want to hedge your currency exposure. The U.S. risk-free rate is 5.5 percent, and the U.K. risk-free rate is 4.5 percent. These rates are expected to remain unchanged over the next month. The current spot rate is $1.90.
1.Move forward 10 days. The spot rate is $1.93. Interest rates are unchanged. Calculate the value of your forward position. Do not round intermediate calculations. Round your answer to 4 decimal places.
Don't solve.
I mistakenly submitted blurr image please comment i will write values.
please dont Solve with incorrect values otherwise unhelpful.
The image is blurr please comment i will write values.
please dont Solve with incorrect values otherwise unhelpful.
Chapter 7 Solutions
Corporate Finance (4th Edition) (Pearson Series in Finance) - Standalone book
Ch. 7.1 - Explain the NPV rule for stand-alone projects.Ch. 7.1 - What does the difference between the cost of...Ch. 7.2 - Prob. 1CCCh. 7.2 - If the IRR rule and the NPV rule lead to different...Ch. 7.3 - Can the payback rule reject projects that have...Ch. 7.3 - Prob. 2CCCh. 7.4 - For mutually exclusive projects, explain why...Ch. 7.4 - What is the incremental RR and what are its...Ch. 7.5 - Prob. 1CCCh. 7.5 - Prob. 2CC
Ch. 7 - Your brother wants to borrow 10,000 from you. He...Ch. 7 - You are considering investing in a start-up...Ch. 7 - You are considering opening a new plant. The plant...Ch. 7 - Your firm is considering the launch of a new...Ch. 7 - Bill Clinton reportedly was paid 15 million to...Ch. 7 - FastTrack Bikes, Inc. is thinking of developing a...Ch. 7 - OpenSeas, Inc. is evaluating the purchase of a new...Ch. 7 - You are CEO of Rivet Networks, maker of ultra-high...Ch. 7 - You are considering an investment in a clothes...Ch. 7 - You have been offered a very long term investment...Ch. 7 - You are considering opening a new plant. The plant...Ch. 7 - Bill Clinton reportedly was paid 15 million to...Ch. 7 - Prob. 13PCh. 7 - Innovation Company is thinking about marketing a...Ch. 7 - You have 3 projects with the following cash flows:...Ch. 7 - You own a coal mining company and are considering...Ch. 7 - Prob. 17PCh. 7 - Prob. 18PCh. 7 - Prob. 19PCh. 7 - Prob. 20PCh. 7 - You are a real estate agent thinking of placing a...Ch. 7 - Prob. 22PCh. 7 - You are deciding between two mutually exclusive...Ch. 7 - You have just started your summer Internship, and...Ch. 7 - Prob. 25PCh. 7 - Prob. 26PCh. 7 - Prob. 27PCh. 7 - Prob. 28PCh. 7 - Prob. 29PCh. 7 - Prob. 30PCh. 7 - Prob. 31PCh. 7 - Prob. 32PCh. 7 - Prob. 33PCh. 7 - Orchid Biotech Company is evaluating several...
Knowledge Booster
Similar questions
- Question 6 A five-year $50,000 endowment insurance for (60) has $1,000 underwriting expenses, 25% of the first premium is commission for the agent of record and renewal expenses are 5% of subsequent premiums. Write the gross future loss random variable: Presuming a portfolio of 10,000 identical and independent policies, the expected loss and the variance of the loss of the portfolio are given below (note that the premium basis is not given or needed): E[L] = 10,000(36,956.49 - 3.8786P) V[L] 10,000 (50,000 + 14.52P)². 0.00095 Find the premium that results in a 97.5% probability of profit (i.e. ¹ (0.975) = 1.96). Premium: Please show your work belowarrow_forwardWhat corporate finance?? can you explain this? fully no aiarrow_forwardWhat is corporate finance? how this is usefull?arrow_forward
- Pam and Jim are saving money for their two children who they plan to send to university.The eldest child will enter university in 5 years while the younger will enter in 7 years. Each child is expected spend four years at university. University fees are currently R20 000 per year and are expected to grow at 5% per year. These fees are paid at the beginning of each year.Pam and Jim currently have R40 000 in their savings and their plan is to save a fixed amount each year for the next 5 years. The first deposit taking place at the end of the current year and the last deposit at the date the first university fees are paid.Pam and Jim expect to earn 10% per year on their investments.What amount should they invest each year to meet the cost of their children’s university fees?arrow_forwardPam and Jim are saving money for their two children who they plan to send to university.The eldest child will enter university in 5 years while the younger will enter in 7 years. Each child is expected spend four years at university. University fees are currently R20 000 per year and are expected to grow at 5% per year. These fees are paid at the beginning of each year.Pam and Jim currently have R40 000 in their savings and their plan is to save a fixed amount each year for the next 5 years. The first deposit taking place at the end of the current year and the last deposit at the date the first university fees are paid.Pam and Jim expect to earn 10% per year on their investments.What amount should they invest each year to meet the cost of their children’s university fees?arrow_forwardYou make a loan of R100 000, with annual payments being made at the end of each year for the next 5 years at a 10% interest rate. How much interest is paid in the second year?arrow_forward
- Dr Z. Mthembu is the owner of Mr Granite, a business in the Western Cape. After more than 28 years of operation, the business is thinking about taking on a new project that would provide a profitable new clientele. With only R1.5 million in resources, the company is now working on two competing projects. The starting costs for Project X and Project Y are R625,000 and R600000, respectively. These projected are estimated for the next 7 years timeframe. According to SARS, the tax rate is 28%, and a discount rate of 11.25% is applied.Projects X Project YProject X Project Y129000 145000154000 145000312000 145000168000 14500098250 14500088750 14500016050 145000arrow_forwardDr Z. Mthembu is the owner of Mr Granite, a business in the Western Cape. After more than 28 years of operation, the business is thinking about taking on a new project that would provide a profitable new clientele. With only R1.5 million in resources, the company is now working on two competing projects. The starting costs for Project X and Project Y are R625,000 and R600000, respectively. These projected are estimated for the next 7 years timeframe. According to SARS, the tax rate is 28%, and a discount rate of 11.25% is applied.Projects X Project YProject X Project Y129000 145000154000 145000312000 145000168000 14500098250 14500088750 14500016050 145000arrow_forwardDr Z. Mthembu is the owner of Mr Granite, a business in the Western Cape. After more than 28 years of operation, the business is thinking about taking on a new project that would provide a profitable new clientele. With only R1.5 million in resources, the company is now working on two competing projects. The starting costs for Project X and Project Y are R625,000 and R600000, respectively. These projected are estimated for the next 7 years timeframe. According to SARS, the tax rate is 28%, and a discount rate of 11.25% is applied.Projects X Project YProject X Project Y129000 145000154000 145000312000 145000168000 14500098250 14500088750 14500016050 145000arrow_forward
- Dr Z. Mthembu is the owner of Mr Granite, a business in the Western Cape. After more than 28 years of operation, the business is thinking about taking on a new project that would provide a profitable new clientele. With only R1.5 million in resources, the company is now working on two competing projects. The starting costs for Project X and Project Y are R625,000 and R600000, respectively. These projected are estimated for the next 7 years timeframe. According to SARS, the tax rate is 28%, and a discount rate of 11.25% is applied.Projects X Project YProject X Project Y129000 145000154000 145000312000 145000168000 14500098250 14500088750 14500016050 145000arrow_forwardAn investor buys 100 shares of a $40 stock that pays an annual cash dividend of $2 a share (a 5 percent dividend yield) and signs up for the DRIP. a. If neither the dividend nor the price changes, how many shares will the investor have at the end of 10 years? How much will the position in the stock be worth? Answer: 5.000 shares purchased in year 1 5.250 shares purchased in year 2 6.078 shares purchased in year 5 62.889 total shares purchased b. If the price of the stock rises by 6 percent annually but the dividend remains at $2 a share, how many shares are purchased each year for the next 10 years? How much is the total position worth at the end of 10 years? Answer: 4.717 shares purchased in year 1 4.592 shares in year 3 3.898 shares in year 10 Value of position: $10,280 c. If the price of the stock rises by 6 percent annually but the dividend rises by only 3 percent annually, how many shares are purchased each year for the next 10 years? How much is the total position worth at the…arrow_forwardDr Z. Mthembu is the owner of Mr Granite, a business in the Western Cape. After more than 28 years of operation, the business is thinking about taking on a new project that would provide a profitable new clientele. With only R1.5 million in resources, the company is now working on two competing projects. The starting costs for Project X and Project Y are R625,000 and R600000, respectively. These projected are estimated for the next 7 years timeframe. According to SARS, the tax rate is 28%, and a discount rate of 11.25% is applied.Projects X Project YProject X Project Y129000 145000154000 145000312000 145000168000 14500098250 14500088750 14500016050 145000 Calculate the IRR for the two proposed Projectsarrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Managerial Accounting: The Cornerstone of Busines...AccountingISBN:9781337115773Author:Maryanne M. Mowen, Don R. Hansen, Dan L. HeitgerPublisher:Cengage Learning
Principles of Accounting Volume 2AccountingISBN:9781947172609Author:OpenStaxPublisher:OpenStax College
Managerial Accounting: The Cornerstone of Busines...
Accounting
ISBN:9781337115773
Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Publisher:Cengage Learning
Principles of Accounting Volume 2
Accounting
ISBN:9781947172609
Author:OpenStax
Publisher:OpenStax College