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frozen [14]
2 years ago
10

A "Name That Tune" contest has a grand prize of $500,000. However, the contest stipulates that the winner will receive just $200

,000 immediately, and $30,000 at the end of each of the next 10 years. Assuming that one can earn 8% on their money, how much has the contest winner actually won?
(A) 1,302
(B) $201,302
(C) $401,302
(D) $500,000
(E) None of the above
Business
1 answer:
Alexxx [7]2 years ago
3 0

Answer:

The correct answer is (C) $401,302

Explanation:

To get how much the contest winner actually won, we have to calculate the amount receive at the end of each year discounted at this moment. Then,  we added  all the payments.  

For example, the first payment in  $200,000 at this moment,  so we add  $200,000.  

At the end of the first year we receive $30,000, and the rate of discount is 8%

The formula of discount is P=A/ (1+r)ⁿ

A=Final amount  

P= Principal

r= interest rate

n= time

Year 1 = A/ (1+r)ⁿ =$30,000/1,08¹= 27777,77

Year 2 =$30,000/1,08²= 25720,16

Year 3=23814,96

Year 4=22050,89

Year 5=20417,49

Year 6=18905,08

Year 7=17504,71

Year 8=16208,06

Year 9=15007,46

Year 10=13895,80

 

Total  401302,44

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Brown Street Grocers has a cost of equity of 11.8 percent, a pre-tax cost of debt of 6.9 percent, and a tax rate of 35 percent.
Nastasia [14]

Answer:

The correct answer to the following question is option E) 9.06% .

Explanation:

Here the cost of equity given is  - 11.8%

Pre tax cost of debt- 6.9%

Tax rate- 35%

So the after tax cost of debt - 6.9% x 65%

= 4.485%

The debt to equity ratio - .6

So the weight of debt - .6 / ( 1 + .06 )

= .375

Weight of equity - 1 / ( 1 + .06 )

= .625

Weighted average cost of capital =

Debts cost x weight of debt + Equity cost x weight of equity

= 4.485 x .375 + 11.8 x .625

= 1.681875 + 7.735

= 9.06%

7 0
3 years ago
Coach's agreement with Lexus to produce automobiles with Coach leather interior is an example of A. co-branding. B. architectura
nikitadnepr [17]

Answer:

CO-BRANDING

Explanation:

Also known as brand partnership, it is a marketing strategy that incorporates multiple brands on a good or service. It involves the brands of at least 2 organisations. Just like the Lexus and coach described above.

8 0
3 years ago
intext:"A corporation issued 6,000 shares of its $2 par value common stock in exchange for land that has a market value of $84,0
guajiro [1.7K]

Answer:

Date     Account Titles and Explanation              Debit       Credit

              Land                                                         $84,000

                 Common stock                                                     $12,000

                  Paid in capital in excess of par value                 $72,000

Workings:

Amount of Common stock = Number of shares * Paid in capital per share

= 6,000 shares * $2

= $12,000

Amount of excess of paid in capital = Market value of land - Amount of common stock

= $84,000 - $12,000

= $72,000

8 0
3 years ago
Knightmare, Inc., will pay a dividend of $6.15, $9.05, and $12.25 per share for each of the next three years, respectively. The
iVinArrow [24]

Answer:

The current stock price is $21.54

Explanation:

The current price of the share of Knightmare Inc is the present value of all future cash flows receivable from owning stake in the company.

The future cash flows in this sense are the dividends payable by the company in years 1,2 and 3 which are $6.15,$9.05 and $12.25 per share respectively.

The discount factor in this case is given as 1/(1+r)^N where  r is the required rate of return of 11.7% and the relevant year of dividend receipt,hence the share price is computed thus:

Year   cash flow discount factor               PV

1            $6.15      1/(1+11.7%)^1=0.89525   $5.5

2             $9.05  1/(1+11.7%)^2=0.80148      $7,25

3            $12.25  1/(1+11.7%)^3=0.71753        $8.79

Total present value                                      $21.54

4 0
3 years ago
Read 2 more answers
To the following:
vlabodo [156]
Generous- Selfish
Tremendous- Small
Famous- Unknown
Publicity- Secrecy
Imaginative- Unskillful
Outstanding-Unexceptional
7 0
3 years ago
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