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3 years ago

What is the present value of a constant perpetuity of 25 per year where the required rate of return is 5%

Business

1 answer:

Xelga [282]3 years ago

5 0

Answer:

The present value of a constant perpetuity of 25 per year where the required rate of return is 5% is:

$500

Explanation:

a) Data and Calculations:

A constant perpetuity = $1

Present value factor of a constant perpetuity for 25 per year at 5% is $1/0.002

Number of periods for the perpetuity per year = 25

Required rate of return = 5%

Rate of return per period = 5%/25 = 0.002

Therefore, the value of a constant perpetuity = $1/0.002

= $500

The $500 can be used to multiply any amount given obtain the total value of the perpetuity.

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Development cost $ 1,250,000 Estimated development time 9 months Pilot testing $ 200,000 Ramp-up cost $ 400,000 Marketing and su

siniylev [52]

Answer:

Tuff Wheels

The net present value of the project is:

= $13,617,154

Explanation:

a) Data and Calculations:

Development cost $ 1,250,000

Estimated development time 9 months

Pilot testing $ 200,000

Ramp-up cost $ 400,000

Total Project cost in Year 0 = $1,850,000 ($ 1,250,000 + $200,000 + $400,000)

Marketing and support cost $ 150,000 per year

Sales and production volume 60,000 per year

Unit production cost $ 100

Unit price $ 205

Contribution per unit = $105 ($205 - $100)

Total contribution margin = $6,300,000 ($105 * 60,000)

Marketing and support cost $ 150,000

Interest rate 8% 148,000

Net income (cash flow) $6,002,000

Discount rate = 8%

Annual net cash inflow = $6,002,000

Annuity factor = 2.577

Total cash inflow = $15,467,154 ($6,002,000 * 2.577)

Total project cost 1,850,000

Net present value $13,617,154

8 0

2 years ago

1. The ratio of the money earned on an investment relative to the amount of the investment.

liraira [26]

i dont know high school

7 0

3 years ago

You find that the bid and ask prices for a stock are $14.25 and $15.45, respectively. If you purchase or sell the stock, you mus

Nezavi [6.7K]

Answer:

$180

Explanation:

The bid price of a stock is $14.25

The ask-price of a stock is $15.45

A flat commission of $30 must be paid in the stock

100 shares of stock are bought

Therefore, the total implied and actual transaction costs can be calculated as follows

= Commission+(ask price-bid price)×number of shares

= 30×2+($15.45-$14.25)×100

= 60+ 1.2×100

= 60+120

= $180

Hence the total implied and actual transaction cost is $180

6 0

3 years ago

Donald Gilmore has $100,000 invested in a 2-stock portfolio. $35,000 is invested in Stock X and the remainder is invested in Sto

netineya [11]

Answer:

Beta of Portfolio is 0.98

Explanation:

<u>Given</u>: Investment in security X = $35,000

Investment in security Y = $65,000

Beta of X = 1.5

Beta of Y = 0.70

Beta is a measure of degree of responsiveness of a security return with respect to market return.

The portfolio beta is the weighted average beta of individual stock beta's in a portfolio.

Beta of portfolio = Beta of Stock X × Weightage of money invested in X + Beta of Y × Weightage of money invested in Y

Beta of Portfolio = 1.50 × $\frac{35,000}{100000}$ + 0.7 × $\frac{65000}{100000}$

Beta of Portfolio = 0.525 + 0.455 = 0.98

6 0

3 years ago

Blue Bell stock is expected to return 8.4 percent in a boom, 8.9 percent in a normal economy, and 9.2 percent in a recession. Th

anygoal [31]

Answer:

13%

Explanation:

The appropriate formula to use is as shown below:

Standard Deviation = $\sqrt{\frac{∑f(x-y^{2} )}{∑f}}$

Where ∑ is the summation symbol,

f is the frequency (in this sample, the probability expressed in decimal),

x is the expected return,

y is the mean return.

The formula for y, the mean return, is as follows:

y = $\frac{∑fx}{∑f}}$ .

All computations are attached.

From the computation,

the mean return = 8.876%

the standard deviation of returns = 12.7377% = 13%

3 0

3 years ago