Abby purchased 100 shares of her father’s favorite stock for $27 per share exactly 1 year ago, commission free. She sold it today for a total amount of $3125. She plans to invest the entire amount in...

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Abby purchased 100 shares of her father’s favorite stock for $27 per share exactly 1 year ago, commission free. She sold it today for a total amount of $3125. She plans to invest the entire amount in a different corporation’s stock today, but she must now pay a $60 commission fee. If she plans to sell this new stock exactly 1 year from now and realize the same return as she has just made, what must be the total amount she receives next year? Include the commission fee as a part of the purchase price, but neglect any tax effects. The total amount that she receives next year is $ . ____________________________________________________________ In order to build a new warehouse facility, the regional distributor for Valco Multiposition Valves borrowed $1.3 million at 12% per year interest. If the company repaid the loan in a lump sum amount after 2 years, what was the amount of the payment? (You must provide an answer before moving to the next part.) The amount of the payment was $ __________________________________________ (this was to be after question before) In order to build a new warehouse facility, the regional distributor for Valco Multiposition Valves borrowed $1.3 million at 12% per year interest. If the company repaid the loan in a lump sum amount after 2 years, what was the amount of interest? The amount of interest was $ . __________________________________________ A publicly traded construction company reported that it just paid off a loan that it received 1 year earlier. If the total amount of money the company paid was $1.9 million and the interest rate on the loan was 13% per year, how much money did the company borrow 1 year ago? The amount of money that the company borrowed 1 year ago is $ . ___________________________________________________ RKI Instruments borrowed $4,900,000 from a private equity firm for expansion of its facility for manufacturing carbon monoxide monitors. The company repaid the loan after 1 year with a single payment of $5,200,000. What was the interest rate on the loan? The interest rate on the loan was % per year. ________________________________ The Nicor family is planning to purchase a new home 4 years from now. If they have $200,000 now, how much will be available at the time of purchase? The fund grows at a compound rate of 11% per year. 4 years from now, $ will be available. ____________________________________ At a simple interest rate of 14% per year, determine how long will it take $15,000 to increase to 4 times as much. Compare the time it will take to double if the rate is 20% per year simple interest. At an interest rate of 14%, it will take__?_years for the amount to increase 4 times as much. It will take _?__ years for the amount to double at an interest rate of 20%. _________________________________________________________ To make CDs look more attractive as an investment than they really are, some banks advertise that their rates are higher than their competitors’ rates; however, the fine print says that the rate is based on simple interest. If you were to deposit $28,000 at 8% per year simple interest in a CD, what compound interest rate would yield the same amount of money in 3 years? The compound interest rate that would yield the same amount of money in 3 years is % per year. ___________________________________________________ What is the weighted average cost of capital for a corporation that finances an expansion project using 25% retained earnings and the rest as debt capital? Assume the interest rates are 9% for equity financing and 29% for debt financing. The weighted average cost of capital is % ______________________________________________________ Your boss, whose background is in financial planning, is concerned about the company’s high weighted average cost of capital (WACC) of 29%. He has asked you to determine what combination of debt-equity financing would lower the company’s WACC to 15%. If the cost of the company’s equity capital is 6% and the cost of debt financing is 28%, what debt-equity mix would you recommend? The debt-equity mix should be % debt and % equity financing. ------------222222222222222----------------------- The Department of Traffic Security of a city is considering the purchase of a new drone for aerial surveillance of traffic on its most congested streets. A similar purchase 4 years ago cost $1,200,000. At an interest rate of 6% per year, what is the equivalent value today of the previous $1,200,000 expenditure? The equivalent value today is $ . _________________________________________ Determine the size of your investment account 20 years from now (when you plan to retire) if you deposit $16,000 each year, beginning 1 year from now, and the account earns interest at a rate of 10% per year. The size of the investment account is $ . ______________________________________________ Durban Moving and Storage wants to have enough money available 6 years from now to purchase a new tractor-trailer. If the estimated cost will be $270,000, how much should the company set aside each year if the funds earn 6% per year? The company should set aside $ each year. _____________________________________________________ Required information Consider the following factors. 1. (F/P,17%,34) 2. (A/G,23%,45) Find the numerical values of the factors using linear interpolation. The numerical value of factor 1 is . The numerical value of factor 2 is . _____________________________________________________ Required information Consider the following factors. 1. (F/P,17%,34) 2. (A/G,23%,45) Find the numerical values of the factors using the appropriate formula. The numerical value of factor 1 is . The numerical value of factor 2 is . _______________________________________ An arithmetic cash flow gradient series equals $550 in year 1, $650 in year 2, and amounts increasing by $100 per year through year 11. At i = 10% per year, determine the present worth of the cash flow series in year 0. The present worth of the cash flow series in year 0 is $ . ________________________________________________ The future worth in year 10 of an arithmetic gradient cash flow series for years 1 through 10 is $625,000. If the gradient increase each year, G, is $1750, determine the cash flow in year 1 at an interest rate of 9% per year. The cash flow in year 1 is $ . ___________________________________________________ A company that manufactures purgable hydrogen sulfide monitors will make deposits such that each one is 8% larger than the preceding one. How large must the first deposit at the end of year 1 be if the deposits extend through year 10 and the 5th deposit is $6000? Use an interest rate of 11% per year. The first deposit at the end of year 1 must be $ . _______________________________________________ A start-up company that makes robotic hardware for CIM (computer integrated manufacturing) systems borrowed $1.1 million to expand its packaging and shipping facility. The contract required the company to repay the lender through an innovative mechanism called "faux dividends," a series of uniform annual payments over a fixed period of time. If the company paid $295000 per year for five years, what was the interest rate on the loan? The interest on the loan was %. _____________________________________________ An A&E firm planning for a future expansion deposited $38,000 each year for 5 years into a sinking (investment) fund that was to pay an unknown rate of return. If the account had a total of $455,000 immediately after the fifth deposit, what rate of return did the company make on these deposits? The rate of return that the company made was %.
May 14, 2021
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