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Artist 52 [7]
3 years ago
5

You are looking at an investment that has an effective annual rate of 14.3 percent. a. What is the effective semiannual return?

(Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) b. What is the effective quarterly return? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) c. What is the effective monthly return? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
Business
1 answer:
Pavel [41]3 years ago
8 0

Answer: The effective semiannual return is = 6,91 percent.

The effective quarterly return is= 3,40 percent.

The effective monthly return is = 1,12 percent.

Explanation:

The effective semiannual return is: ( 1 + 0,143 ) ^{\frac{6}{12} } - 1 = 6,91 percent.

The effective quarterly return is: ( 1 + 0,143 ) ^{\frac{3}{12} } - 1 = 3,40 percent.

The effective monthly return is: ( 1 + 0,143 ) ^{\frac{1}{12} } - 1 = 1,12 percent.

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5,000 7.5 percent coupon bonds outstanding, $1,000 par value, 19 years to maturity, selling for 105 percent of par; the bonds ma
vitfil [10]

Answer:

10.53%

Explanation:

WACC = wE*rE + wP*rP + wD*rD(1-tax)

<u>Market values;</u>

Debt = 1.05 *5,000*1000 = 5,250,000

Preferred stock = 15,500 *107 = 1,658,500

Common equity = 105,000 *63 = 6,615,000

Total market value = 13,523,500

wE = 6,615,000/ 13,523,500 = 0.4891

wP= 1,658,500/13,523,500 = 0.1226

wD = 5,250,000/13,523,500 = 0.3882

<u>Cost of capital;</u>

Cost of common equity, rE using CAPM;

rE = 0.06 + (1.13*0.09) = 0.1617

rE = 16.17%

Cost of preferred stock = 6%

Cost of debt

using a financial calculator, input the following; N= 38, PV = -1050, PMT = 37.5,

FV =1000, then CPT I/Y = 3.51% . So annual rate = 3.51% *2 = 7.02%

WACC = (0.4891*0.1617) +(0.1226* 0.06) + [0.3882 *0.0702(1-0.31)]

WACC = 0.0791 + 0.007356 + 0.0188

WACC = 0.1053 or 10.53%

4 0
3 years ago
Improving performance and striving for a better career is an example of ....
mojhsa [17]
Being and expert!!!!!!!!!!!!!!!!!!!!!!!1
4 0
3 years ago
Does the market system result in allocative​ efficiency? in the long​ run, perfect competition
Inga [223]
C.

Allocative efficiency in simple terms basically means there is no wastage, therefore if producers produce at price equals marginal coat, they are producing at the point where consumers are willing to pay that final price. Refer to the poorly drawn diagram for reference.

7 0
3 years ago
Hugh has the choice between investing in a city of heflin bond at 6.60 percent investing in a surething bond at 10.00 percent. a
butalik [34]

Answer: Surething Inc, needs to issue bonds with 11% interest rate in order to make Hugh indifferent between investing in two bonds.

We arrive at the answer in the following manner:

The City of Helfin bonds are municipal bonds and hence they are tax free. This means that Hugh will get an after - tax return of 6.6%.

The bonds of Surething Inc offering a 10% interest, however are taxed at 40%. So, the current after-tax returns of the bond is:

After - tax return= Pre- tax return * (1 -tax rate)

After-tax return= 0.1 * (1-0.4)

Current after tax return = 0.06 or 6%

However Hugh will be indifferent to investing in these two bonds only if they offer the same after-tax return of 6.6%.

Given this, we can calculate the indifference rate as follows:

After - tax return= Pre- tax return * (1 -tax rate)

0.066= Pre- tax return * (1 -0.4)

\frac{0.066}{0.6}= Pre-tax return

Pre-tax return = 0.11 or 11%.

8 0
3 years ago
Machines A and B are mutually exclusive and have the following investment and operating costs. Machine A has a life of 3 years w
olganol [36]

Answer:

$-1081.01

$-2536.89

Explanation:

Equivalent annual cost method is a capital budgeting method used to choose between two projects with an unequal life span

The decision rule is to choose the product with the higher Equivalent annual cost

Equivalent annual annuity method is better for making this decision because if net present value is used, the project with the higher useful life would be chosen. this does not mean it is more profitable

EAA = \frac{r(NPV)}{1 - \frac{1}{(1+ r)^{n} } }

Net present value is the present value of after-tax cash flows from an investment less the amount invested.  

NPV can be calculated using a financial calculator

Machine A

Cash flow in year 0 = - $5,000

Cash flow in year 1 =  $800

Cash flow in year 2 =  $900

Cash flow in year 3 =  $1,000  

I = 9%

NPV A = -2736.35

Machine B

Cash flow in year 0 = -$6,000

Cash flow in year 1 = $850

Cash flow in year 2 = $900

I = 9%

NPV B = -4462.67

EAA =

(0.09 x -2736.35) / ( 1 - (1.09)^3) = $-1081.01

(0.09 x -4462.67) / ( 1 - (1.09)^2)= $-2536.89

3 0
2 years ago
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