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polet [3.4K]
3 years ago
14

A project is expected to produce cash flows of $12,800, $15,900, and $18,000 over the next 3 years, respectively. After 3 years,

the project will be discontinued. What is this project worth today at a discount rate of 12.5 percent?
Select one:

A. $36,808.17
B. $35,758.00
C. $34,435.74
D. $35,201.76
E. $36,582.72
Business
1 answer:
KATRIN_1 [288]3 years ago
7 0

Answer:

The correct answer is Option (E).

Explanation:

According to the scenario, the given data are as follows:

FV of 1st year = $12,800

FV of 2nd year = $15,900

FV of 3rd year = $18,000

Discount rate = 12.5%

So, we can calculate the present value by using following formula:

PV = FV × (1 ÷ (1+r)^t

So, by putting the value we get

PV =$12,800 × 1 ÷ (1 + 0.125)^1 + $15,900 × 1 ÷ (1 + 0.125)^2 + $18,000 × 1 ÷ (1 + 0.125)^3

PV =$12,800 × 1 ÷ (1.125)^1 + $15,900 × 1 ÷ (1.125)^2 + $18,000 × 1 ÷ (1.125)^3

PV = $36,582.72

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One problem with the consumer price index stems from the fact that, over time, consumers tend to buy larger quantities of goods
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3 years ago
A company recently issued 9% preferred stock. The preferred stock sold for $40 a share with a par of $20. The cost of issuing th
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Answer:

The company's cost of preferred stock is 5.1%

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Dividend = 0.09*20=1.8

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If the expected rate of inflation was 3% and the actual rate was 6.2%; the systematic response coefficient from inflation, would
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The systematic response coefficient from inflation, would result in a change in any security return of <u>3.2 βI</u>.

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<em><u>Given</u></em>:

Expected rate of inflation = 3%

Actual rate of inflation = 6.2%

The change in security return can be calculated by obtaining the differences between actual and expected levels of inflation.

Change in security return= Actual rate of inflation- Expected rate of inflation

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