Tara invests $2,500 today and another $1,500 a year from now. Her investments starting year 2 keeps increasing by $100 every yea
r for the next 10 years from today. She stops investing from year 11 until year 20. If she earns a rate of return of 7% on her investments, determine future worth of her investments 20 years from now
1 answer:
Answer:
$61,175
Explanation:
Base on the scenario been described in the question, we expected to solve for the future worth
The table of the cash flow is shows in the picture
We can find that by calculating the Future worth
Future Worth = {2,500 + 1,500(P/A 7%,10) 100 + (P/G 7%,10) } [F/P 7%, 20]
Future worth = { 2,500 + 1500(7.024) + 100(27.716)}
Future worth = $61,175
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Answer:
A) is maximizing her total utility from the given fixed budget.
Explanation:
The equal marginal principle refers to the principle in which the consumer would select that combination of goods which maximise its total utility. It could be selected by having marginal utility and its price
And for profit maximization, the marginal utility and the price is equivalent to both the goods.
i.e
30 = 30
Hence, the correct option is a.
Answer:
WACC 6.18%
Explanation:
to get the cost of capital we solve using the gordon model:
D1 1.55
P 28
f 0.00
g 0.02
Ke 0.075357143
Then for the cost of debt, we need to calculate the YTM of the bonds:
which is the rate at which the present value of the coupon payment and maturity equals the market price:
For the complexity this is done with excel or a financial calculator there is also an approximation formula
YTM with excel: 0.073516565
now that we good this we need to determinate the weigth of equity and debt:
250,00 shares x 28 dollars each = 7,000,000
1,500 bonds of $1,000 each at 98% = 7,350,000
value of the company: 7,000,000 + 7,350,000 = 14,350,000
Ew: 7,000,000 / 14,350,000 = 0.487804878
Dw: 7,350,000 / 14,350,000 =0.512195122
Now we got all values and we can determinate the WACC:
Ke 0.075357143
Equity weight 0.487804878
Kd 0.074
Debt Weight 0.512195122
t 0.34
WACC 0.0617752 = 6.18%