Carlos "Cookie" Carrasco is looking to build a winter home on Margarita Island in his native Venezuela. The amount of money he will spend is $17 mn. He will finance the new home with $14 mn in borrowings at 7%, and the remainder with equity. If Mr. Carrasco calculates his weighted average cost of capital (WACC) at 15%, what would his cost of equity be? a) 10.25% b) 9.24% c) 8.23% d) 7.22% e) 6.21%

Carlos "Cookie" Carrasco is looking to build a winter home on Margarita Island in his native Venezuela. The amount of money he will spend is $17 mn. He will finance the new home with $14 mn in borrowings at 7%, and the remainder with equity. If Mr. Carrasco calculates his weighted average cost of capital (WACC) at 15%, what would his cost of equity be? a) 10.25% b) 9.24% c) 8.23% d) 7.22% e) 6.21%

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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The Browning family of Colorado wants to buy a $102,000 house. (a) If they can get a loan of 80% of the value of the house, what is the amount of the loan?$ (b) What will be the down payment on this loan?$ (c) If they decide to obtain an FHA loan, what will be the minimum cash investment? (Do not forget that the maximum FHA loan for this location has to be determined using the FHA Maximum Loan Values by State table.)$
Paolo is considering purchasing a Sunlife Capital investment. Paolo will receive P1,000 every three months for the next two years if he purchases the investment. He would make the first P1,000 payment as soon as he purchases the investment. How much should Paolo be willing to pay for this investment if his required rate of return is 16%? * P1,345.60 P10,764.80 P7,002.05 P1,368.57
Cornel offers to pay you $5,000 in 3 years and wants to borrow some money from you now in return.You estimate the opportunity cost of capital to be 8%. How much are you willing to loan Cornel againstthis payment? Choose the closest. a. $3,969 b. $4,568 c. $5,223 d. $6,299
Ashley projects that she can get $100,000 cash per year for 5 years on a real estate investment project. If Ashley wants to earn a rate of return of 9%, what is the maximum that she should pay for the investment? (rounded to the nearest dollar)A. $360,478 B. $446,429 C. $560,000 D. $388,965
John has an investment opportunity that promises to pay him $16,000 in four years. Suppose the opportunity requires John to invest $13,200 today. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) What is the interest rate John would earn on this investment? (Round your interest rate to the nearest whole percentage.) Solve for i Present Value: n = i = Future Value:
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4) Mr Fancyman has consulted you as a broker. According to him, he wants to invest in a pension fund and has ¢1,500,000 to invest. If the return on capital is 20% per annum, advise Mr. Fancyman on the income to be earned annually for 4 years if he ultimately buys the investment. 5) Mr. Afriyie recently purchased a dilapidated property in the CBD for ¢8 million. He plans to refurbish the property into a first class shopping centre and it is estimated that he has to spend ¢500,000 per month on the project for the next 5 years when the project will be completed. Calculate the true cost of the project at the time of completion if he expects returns on his capital at 1734% per annum. 6) The Accra Metropolitan Assembly is planning the construction of a district central market at Achimota. It is estimated that the proposed market could produce an annual income of ¢5,000,000 for the first 25 years. Mr Antwi has been approached to finance the project on condition that he will be given the right…
Justine is thinking about purchasing an investment from RCBC Capital. If she buys the investment, Justine will receive P1,000 every three months for two years. The first P1,000 payment will be made as soon as she purchases the investment. If Justine's required rate of return is 16%, how much should she be willing to pay for this investment? a. P10,764.80 b. P7,002.05 c. P1,368.57 d. P1,345.60
Ashley projects that she can get $130,000 cash per year for 5 years on a real estate investment project. If Ashley wants to earn a rate of return of 10%, what is the maximum that she should pay for the investment? (PV of $1 and PVA of $1) Note: Use appropriate factor(s) from the tables provided. Round your answer to the nearest dollar. Multiple Choice O $430,576 $598,000 $492,802 $88,476 Prev 1 of 35 MacBook Air Next >
1.Assume the total cost of a university education will be P250 000 when your child enters university in 18 years. You presently have P43 000 to invest. What rate of interest must you earn on your investment to cover the cost of your child’s university education?
14. Your sister bought a condominium unit for P9 300 000 through a condominium loan which she availed of from a universal bank at a fixed annual rate of 8% for 10 years. What amount is financed by the bank if she is required to pay an equity of 30% of the total price of the condominium?
Manny Kurr is considering the purchase of a beauty salon. The initial cost of this purchase is $16,000. The after-tax cash flows from this investment should be $4,000 per year for the next 5 years. His opportunity cost of capital is 10 percent. Calculate the following:a. Payback—Should Manny buy the beauty salon based on payback if hisrequired payback is less than 3 years?b. The present value of the benefits (PVB),c. The present value of the costs (PVC),d. The net present value (NPV )—Should Manny buy the beauty salon based on NPV rules?e. Profitability index (PI )—what does the profitability index mean in terms of buying the beauty salon?f. Internal rate of return (IRR), (Hint: Use interpolation)—should Manny buythe beauty salon based on IRR rules?g. Accounting rate of return (ARR)—Should Manny buy the beauty salon based on the ARR? (please answer e,f, & g)

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