Chapter 4: Q10BP-c (page 282)
How much would you have to invest today to receive c. $6,000 each year for 10 years at 9 percent?
An investor has to invest $38,505.95 today in order to receive $6,000 each year for 10 years.
Over 30 million students worldwide already upgrade their learning with Vaia!
All the tools & learning materials you need for study success - in one app.
Get started for free
Les Moore retired as president of Goodman Snack Foods Company but is currently on a consulting contract for $35,000 per year for the next 10 years. a. If Mr. Moore’s opportunity cost (potential return) is 10 percent, what is the present value of his consulting contract? b. Assuming Mr. Moore will not retire for two more years and will not start to receive his 10 payments until the end of the third year, what would be the value of his deferred annuity?
Carrie Tune will receive \(19,500 for the next 20 years as a payment for a new song she has written. If a 10 percent rate is applied, should she be willing to sell out her future rights now for \)160,000?
What two conditions must be met to go from Formula 10-7 to Formula 10-8 in using the dividend valuation model?
Larry Davis borrows $80,000 at 14 percent interest toward the purchase of a home. His mortgage is for 25 years.
a.How much will his annual payments be? (Although home payments are usually on a monthly basis, we shall do our analysis on an annual basis for ease of computation. We will get a reasonably accurate answer.)
b.How much interest will he pay over the life of the loan?
c.How much should he be willing to pay to get out of a 14 percent mortgage and into a 10 percent mortgage with 25 years remaining on the mortgage?
Assume current interest rates are 10 percent. Carefully consider the timeb value of money. Disregard taxes.
Question: Mr. Dow bought 100 shares of stock at \(14 per share. Three years later, he sold the stock for \)20 per share. What is his annual rate of return?
What do you think about this solution?
We value your feedback to improve our textbook solutions.
