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Fantom [35]
3 years ago
6

An annuity provides for 30 annual payments. The first payment of 100 is made immediately and the remaining payments increase by

8 percent per annum. Interest is calculated at 13.4 percent per annum. Calculate the present value of this annuity.
Business
1 answer:
sammy [17]3 years ago
6 0

Answer:

$1423.38

Explanation:

number of payments ( number of years )(n) = 30

first payment = $100

interest calculated at : 13.4 % = 0.134

increment rate : 8 percent = 0.08

we can calculate the present value using this Equation

= (p / (r-g))  * [1 - [(1+g)/(1+r)]^n ]

where :

p / (r-g) = 100 / (0.134 - 0.08 ) = $1852

[1 - ((1+g)/(1+r)]^n ) =  (1 - ((1.08/1.134)^30 ) =  0.7686

hence the present value of this annuity = $1852 * 0.7686 = $1423.38

Note :

p ( first principal payment ) = $100

r ( calculated interest ) = 13.4% = 0.134

g ( increment interest ) = 8 % = 0.08

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El Capitan Foods has a capital structure of 36% debt and 64% equity, its tax rate is 35%, and its beta (leveraged) is 1.40. Base
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Answer:

The unlevered beta is 1.03

Explanation:

The formula for unlevered beta is given below:

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t is the tax rate at 35% or 0.35

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E is the equity value given as 64% or 0.64

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Unlevered Beta (βA)=1.40/1+(0.65)*0.36/0.64

Unlevered Beta (βA)=1.40/1+(0.65)*0.5625

Unlevered Beta (βA)=1.40/1+0.365625

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6 0
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