1answer.
Ask question
Login Signup
Ask question
All categories
  • English
  • Mathematics
  • Social Studies
  • Business
  • History
  • Health
  • Geography
  • Biology
  • Physics
  • Chemistry
  • Computers and Technology
  • Arts
  • World Languages
  • Spanish
  • French
  • German
  • Advanced Placement (AP)
  • SAT
  • Medicine
  • Law
  • Engineering
Savatey [412]
3 years ago
8

Suppose you just bought an annuity with 9 annual payments of $15,400 at the current interest rate of 11 percent per year. a. Wha

t is the value of the investment at the current interest rate of 11 percent? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) b. What happens to the value of your investment if interest rates suddenly drop to 6 percent? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) c. What happens to the value of your investment if interest rates suddenly rise to 16 percent?
Business
1 answer:
Dafna11 [192]3 years ago
3 0

Answer:

Instructions are listed below

Explanation:

Giving the following information:

Suppose you just bought an annuity with 9 annual payments of $15,400 at the current interest rate of 11 percent per year.

First, we need to determine the final value with the following formula:

FV= {A*[(1+i)^n-1]}/i

A= annual deposit

Then, we can calculate the present value with the following formula:

PV= FV/(1+i)^n

A)i=11%

FV= {15400*[(1.11^9)-1]}/0.11

FV= $218,125.17

PV= 218,125.17/(1.11^9)= $85,270.53

B) i= 6%

FV= {15400*[(1.06^9)-1]}/0.06

FV= $176,966.27

PV= 176,966.27/(1.06^9)= $104,746.06

C) i= 16%

FV= $269,785.02

PV= $70,940.77

You might be interested in
Martin wants to provide money in his will for an annual bequest to whichever of his living relatives is oldest. That bequest wil
8090 [49]

Answer:

$16,667

Explanation:

Given that

Cash flows = $1,000

Growth rate = 6%

Interest rate = 12%

So by considering the above information, the amount would be

Amount = Cash flows ÷ (Interest rate - growth rate)

= $1,000 ÷ (12% - 6%)

= $16,667

We simply applied the above formula so that the amount could come by considering the given information

3 0
3 years ago
Businesses commonly rely upon groups to make decisions because of the many advantages to group decision making. Which of the fol
Andrei [34K]

Answer:

Almost every other business in this universe now relies upon group thinking rather than individual approach to anything.

It has several advantages, some of them are pointed out below:

o) Equality bias, when there are group discussion, this means that everyone has a part of say in the final decision and that leads to equality bias, which is beneficial.

o) More alternatives are generated, it is a fact that when an individual takes a decision, he/she is neglecting a lot of other options to explore which could be a lot beneficial for the business.

o) More acceptance of the final decision, Since the final decision taken is with the approval and consent of everyone, there is a possibility that the final decision will be more acceptable.

o) Lastly, It creates Synergy, synergy is the idea that a decision as a whole is better than in parts.

Hope this helps you. Good Luck.

3 0
3 years ago
Macro economic misery diminished during the first reagan administration, which means that the phillips curve'
tensa zangetsu [6.8K]
Had to look for the options and here is my answer. What it means when there is a decrease in the Macro economic misery during the first Reagan administration is that the Phillips Curve has shifted from right to left. This implies that there is an ease of the trade-off between the unemployment and inflation. Hope this answer helps.
7 0
3 years ago
You are the IT director at Attaway Airlines, a small regional air carrier. You chair the company's systems review committee, and
Masja [62]

<u>Explanation:</u>

Been the IT director at Attaway Airlines, it will be important to prepare a draft of the advantages and the level of difficulties the new computerized reservation system from an IT perspective.

However, the ultimate goal is not to simply win arguments, but to explain and consider the facts from both the Vice president of finance and the Marketing Manager.

4 0
3 years ago
Standard, Inc. reported EBIT of $35 million for last year. Depreciation expense totaled $20 million and capital expenditures cam
aleksandr82 [10.1K]

Answer:

$710.84 million

Explanation:

Net income = $35 million

Depreciation = $20 million

Capital expenditures = $7 million

Tax rate = 21%

D/E ratio = 0.4

Growth rate = 6%

Equity beta = 1.25

So, firm's asset beta = Equity beta/(1 + D/E*(1-T))

= 1.25/(1 + 0.4*(1-0.21))

= 0.94985

So, Free Cash Flow to the Firm= NI + Depreciation - Capital expenditures

= 35 + 20 - 7

= $48 million

Risk free rate Rf = 5%

Market risk premium = 7.5%

So, firm cost of capital using CAPM is Rf + Beta*(MRP)

Kc = 5 + 0.94985*7.5

Kc = 12.1239

So, Firms value using constant dividend growth model:

FV = FCF*(1+g)/(Kc-g)

FV = 48*1.06 / 0.121239-0.06

FV = 50.88 / 0.061239

FV = 830.8430901876255

FV = $830.84 million

Debt = $120 million

Market Value of equity = FV - Debt

Market Value of equity = $830.84 million - $120 million

Market Value of equity = $710.84 million

6 0
3 years ago
Other questions:
  • 10. Regarding veal, lamb, or pork, the term noisette would properly refer to
    5·1 answer
  • Costs of production that affect people who have no control over how much of a good is produced
    8·1 answer
  • Do savings and loan associations offer checking accounts?
    15·1 answer
  • Determine the missing amount for each of the following:
    15·1 answer
  • (Scenario: Sugar Trade in Birdonia) In autarky, suppose that equilibrium sugar price is $100 per ton in Birdonia, a small agricu
    9·1 answer
  • A merit good is Multiple Choice Income payments for which no goods or services are exchanged. A good society holds to a higher s
    14·1 answer
  • "Bronson Manufacturing is planning to issue $12 million in bonds. Based on a poll of potential investors, they have the highest
    12·1 answer
  • The expected average rate of return for a proposed investment of $500,000 in a fixed asset, with a useful life of four years, st
    5·1 answer
  • ________ refers to the impaired decision making that occurs in a team when making the right decision is less important than main
    12·1 answer
  • Planning, implementing, and controlling the physical flow of a product from its point of origin to its point of consumption is c
    8·1 answer
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!