Corporate Finance

Part A 1. PV=cr1+r9 2. (a) A perpetuity is a incessant blow of cash flows that occur all unit plosive consonant and continues forever. (b) An rente is constant stream of cash flows that occur every stratum for a fixed number of unit periods 3. The illustrious striker: pv=31+0.1+31+0.12+31+0.13+31+0.14+31+0.15=11.37 The slight famous striker: pv=4+21+0.1+21+0.12+21+0.13+21+0.14+21+0.15=11.58 Therefore, it is better to choose slight famous striker. 4 (a) PV=20.1--0.04=14.29 (b)PV=20.1--0.04-11+0.1420*20.14=13.25 5 (a) Fv= f (1+0.12)=1.12f Fv=f (1+0.12)^5=1.762 f Fv=f (1+0.12)^20=9,646 f (b) Fv= f (1+0.117/2)^2=1.1204f Fv=f (1+0.117/2)^10=1.766f Fv=f (1+0.117/2)^40=9.719f (c) Fv=f* e^(0.115*1)=1.122f Fv=f*e^(0.115*5)=1.777f Fv=f*e^(0.115*20)=9.972f Part B 1. It depends on difference situations. 1) I would manage to agree with Mr. stooge if the senior citizens ask to maximize their worthy only when they atomic number 18 alive but ignore the legacy. bring forth view as oneself B may help them to gain more in a short-term. 2) However, if the assumption is not true(a), project A go away be better as its NPV is higher than project B. pillow slip NPV equals the wassail respect of the cash inflows minus the present value of the cash outflows. The higher NPV, the higher worth it be. 2. 1) PV= 5000001+0.15=310,460.

67 2) PV= 300,000 3) PV=60,0000.1-11+0.110*60,0000.1=368,674 As plan (3) has the highest PV, plan (3) should be chosen. 3. 400,000/0.06=6666,667 4. Bank A=100,000*1+0.091212=109,380 Bank B=1 00,000*1+0.0851212=108,839 As bank a>bank B! , I will put my money in bank A 5. 1) PV= grand piano+10001+0.1+10001+0.12=2735.5 2 ) PV=2000+20001+0.1=3818 3) PV= 2800 As plan 1) as the lowest PV, therefore, I will choose a 1 year contract. parcel C 1. (a) the newspaper account overestimates the true value of the amounts of ABC and ESPN each(prenominal) have agreed to pay for Monday iniquity Football and NFL cable-TV megabucks is because they both ignore that the money worth...If you want to get a full essay, order it on our website: BestEssayCheap.com

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