Helps perform calculations and other manipulations of data
Answer:
The annuity will cost him $963,212.95.-
Explanation:
Giving the following information:
Cash flow= $75,000
Interest rate= 0.0525
n= 20
First, we need to calculate the final value. We will use the following formula:
FV= {A*[(1+i)^n-1]}/i + {[A*(1+i)^n]-A}
A= annual cash flow
FV= {75,000*[(1.0525^20) - 1]/0.0525} + {[75,000*(1.0525^20)] - 75,000}
FV= 2,546,491.88 + 133,690.82= $2,680,182.70
Now, the present value:
PV= FV/(1+i)^n
PV= 2,680,182.70/(1.0525^20)
PV= $963,212.95
It’s TRUE I took the test
Answer:
1
Explanation:
Given that,
Weighted average cost of capital = 7%
After-tax cost of debt = 4 percent
Cost of equity = 10 percent
Let the debt of this firm be x, then the equity will be (1 - x),
wacc = (After-tax cost of debt × Debt) + (Cost of equity × Equity)
7% = (4% × x) + [10% × (1 - x)]
0.07 = 0.04x + 0.1 - 0.1x
0.07 = 0.10 - 0.06x
0.06x = 0.10 - 0.07
0.06x = 0.03
x = 0.5
Therefore, if the debt is 0.5 then the equity is 0.5.
Hence, the debt to equity ratio will be:
= 0.5 ÷ 0.5
= 1
The debt-equity ratio is 1 for the firm to achieve its targeted weighted average cost of capital.
Answer:
False
Explanation:
Because taxes are necessary to sustain public expenses, income distribution, seek greater efficiency of the economy and soften the crises. Therefore, its general objective is not to create incentives.
