An investor pays P1,100,000 for a mine which will yield a net income of x pesos at the end of each year for 10 years and then will become valueless. He accumulates a replacement fund to recover his capital by annual investments at 4.5%. Find x if he desires 11.5% return on his investment. a. P216,000 b. P246,000 c. P236,000 d. P226,000
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- Matollows and 250 shillings in the following year. After that, dividends are expected to grow at constant 5% per year. If the required rate of return is 10%, what price should investors pay for such shares today? 4. Suppose a firm is considering a project that would require an initial cash outlay of 15 million shillings and expected to generate shs 4.5 million each year for the next 4 years. The firm assumes that the prices and costs increases at the same rate and that the required rate of return expressed in nominal terms is 14%. The firm also practices a policy whereby cash flows are stated at the prices of period zero. The inflation rate is expected to be 5%. (a)Outline two ways in which the effects that inflation has on the acceptability of investment projects could be considered. (b)Using the NPV technique, is the project worth taking? What have you learned from your analysis as far as treating inflation in investment analysis is concerned? 30/2021 4:39:41 PM Page 1 of 2Show the complete solution and box the final answer/s. 1. In five years, P18,000.00 will be needed to pay for a building renovation. In order to generate this sum, a sinking fund consisting of three annual payments is established now. For tax purposes, no further payments will be made after three years. What payment is necessary if money is worth 15% per annum?2. A debt of ‘x’ pesos, with an interest rate of 7% compounded annually will be retired at the end of 10 years through the accumulation of deposit in the sinking fund invested at 6% compounded semi-annually. The deposit in the sinking fund every end of six months is Php21,962.68. What is the value of ‘x’?You are going to earn ωt = $200,000 when working (age 21 and 60), and thenyou are going to live for the next 20 years with ωt = $0. Find the constant level ofconsumption C during years (21-80) that can be financed by your income (Interestrate is 5%). Find the level of savings St = ωt −C for periods t ≤60 and for t > 60
- A bond has a face value of $15000 and pays an annual coupon rate of 7.2%. The bond is selling for $14990 now and is expected to be sold for $14800 one year from now. What is the bond's expected rate of return? Answer: % (DO NOT ROUND YOUR CALCULATIONS UNTIL YOU REACH THE FINAL ANSWER. ENTER YOUR RESPONSE ROUNDED TO TWO DECIMAL PLACES.)Your father is 50 years old and will retire in 10 years. He expects to live for 25 years after he retires, until he is 85. He wants a fixed retirement income that has the same purchasing power at the time he retires as $60,000 has today. (The real value of his retirement income will decline annually after he retires.) His retirement income will begin the day he retires, 10 years from today, at which time he will receive 24 additional annual payments. Annual inflation is expected to be 6%. He currently has $190,000 saved, and he expects to earn 9% annually on his savings. How much must he save during each of the next 10 years (end-of-year deposits) to meet his retirement goal? Do not round your intermediate calculations. Round your answer to the nearest cent.13. An industrial engineer invests $100,000.00 now, and in three years he adds $3,000.00 to the investment. He is able to withdraw $5,000.00 the first year increasing by $1,000.00 each year for 10 years. He also will be withdrawing $50,000.00 in five years and $20,000.00 in 10 years. Using net present worth analysis, determine the rate of return on the investment. Using equivalent uniform annual worth analysis, determine the rate of return.
- 2.4. Company C is planning to undertake a project requiring initial investment of P105 million. The project is expected to generate P25 million per year in net cash flows for 7 years. Calculate the payback period of the project.EXAMPLE 5-1 An investment of $10,000 can be made in a project that will produce a uniform annual revenue of $5,310 for 5 years and then have a salvage value of $2.000, Annual disbursements will be $3,000 each year for operation and maintenance costs. The company is willing to accept any project that will earn :0% or more, before income taxes, on all invested capital. Show whether this is a desirable investment by using the present worth method. Draw the cash flow diagram2. 1. Company A is eyeing to purchase a piece of factory equipment for P300,000. It is expected to generate P150,000 of additional annual profit during those years. The equipment could would only last for three years. The company thinks it can sell the equipment for scrap afterward for about P10,000. Using IRR, will it be a good decision for the company to purchase the equipment considering a return of 10%.
- A project has an upfront cost (1-0) of $10,000, and it produces annual FCF of $3,000/year from 1-1 through t-7 (seven years). As you can calculate, the net present value of this project, as a stand alone project, without considering inflation, and using a discount rate of 10.0 percent, is $4.605.26. The firm intends to replicate this project out to infinity every seven years, and expects annual inflation to be 4.0 percent for the cash outflows, and 3.0 percent for the cash inflows. That is, the expected cost in Year 7 of replicating this project will be ($10,000) (104) = $13.159.32, and the expected cash inflow in Year 1 will be ($3.000) (1.03)¹ = $3.090. in Year 2 will be ($3.000) (1.03)² $3,182.70, etc. Given this information, and assuming the discount rate remains the same, determine the net present value of this project if it is infinitely replicated and inflation is taken into consideration. $11.315 O $15.804 $9,626 O $8.206 =The common stock of Eddie's Engines, Inc. sells for $15.75 a share. The stock is expected to pay S0.75 per share next month when the annual dividend is distributed. Eddie's has established a pattern of increasing its dividends by 4% annually and expects to continue doing so. What is the market rate of return on this stock? A. 8.26% B.11.34% С. 10.1296 D.14.97% Е. 15%The average house price is Php $12,770,797. Suppose that Nike are trying to buy a house which is equal to $12,770,79 and he have $10,000 today that can be invested at his bank. The bank pays 10% percent annual interest on its accounts. How long will it be before he have enough to buy the house?