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How should an insurance company identify potential exit markets for insurance contracts and for embedded derivatives in such contracts?
Your job pays you only once a year for all the work you did over the previous 12 months. Today, December 31, you just received your salary of $50,000, and you plan to spend all of it. However, you w
A company prepares financial statements in order to summarize financial information. Below are a list of financial statements and a list of descriptions. Financial Statements
Straight-line depreciation is used and the company's income tax rate is 40 percent. Compute the internal rate of return on the new investment.
Abandonment. Henteleff, Inc. is considering a project with the following data. The firm's cost of capital is 10 percent. What should the company do?
What is the price of a share of stock if the firm does not undertake the new investment? What is the value of the investment?
Match the appropriate letter for the key term or concept to each definition provided (items 1-15). Note that not all key terms and concepts will be used.
Determine the adjusted NPV for each project, using the replacement chain procedure. Determine the equivalent annual annuity for each project. Which project should be taken?
Calculate profitability and liquidity measures Presented here are the comparative balance sheets of Hames, Inc., at December 31, 2011 and 2010. Sales for the year ended December 31, 2011, totaled $5
Calculate each project's NPV and IRR. (Assume that the firm's cost of capital after taxes is 10 percent.) Which of the two projects would be chosen according to the IRR criterion?
For each project, compute the NPV at 12 percent cost of capital, and the IRR. Explain why the rankings conflict. Recommend which project should be chosen.
Rank these five projects in the descending order of preference, according to NPV, IRR, and profitability index (or benefit/cost ratio).
Compute the total taxes resulting from the sale of the asset. Assume a 34 percent ordinary tax rate. The asset was purchased for $75,000 3 years ago and has a book value (undepreciated value) of
Calculate (a) the unadjusted NPV, and (b) the certainty equivalent NPV. (c) Determine if the machine should be purchased
Assuming a normal distribution, compute the probability that: (a) the NPV will be zero or less; (b) the NPV will be greater than $45,000; and (c) the NPV will be less than $7,500.
Find the present value of the after tax cash outflows using the after-tax cost of debt as the discount rate. Round your answer to the nearest dollar.
Compute the coefficient of variation for each project, and (b) explain why and the coefficient of variation give different rankings of risk. Which method is better?
The bank wants a 12 percent interest rate and requires five equal annual payments to repay both interest and principal. What will be the dollar amount of the annual payment?
You have applied for a home mortgage of $75,000 to finance the purchase of a new home for 30 years. The bank requires a 14 percent interest rate. What will be the annual payment?
Match the appropriate letter for the key term or concept to each definition provided (items 1-10).
What is the annual percentage rate (APR) if interest is paid to the lender (a) annually? (b) semiannually? (c) quarterly?
Describe the transactions necessary to take advantage of this specific arbitrage opportunity. Calculate the arbitrage profit.
What will be the price of the stock on the ex-dividend date if the dividend is declared? What will be the price of the stock at the end of the year if the dividend is not declared?
Your broker concluded that if they were well-managed, they should have produced better-than-average returns. Do you agree with your broker?
Your father is about to retire. His firm has given him the option of retiring with a lump sum of $20,000 or an annuity of $2,500 for 10 years.