Storage and insurance costs on gold are $10.1 per month per ounce and have just been paid. The spot price of gold is $1879.28 per ounce. Calculate the forward price of a forward contract on gold that matures in 5 months. The risk-free rate is 4.21% 4. (B) $1963.09 (A) $2845.13 (C) $2485.12 (D) $2220.11
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- An investment has the following expected cash flows: Year 2 3 Cash Flows $10,033 $20,003 30,000 The discount rate is 8 percent. The investment's future value at the end of year 3 is $ ___(keep two decimal places)3 Using Exhibit 1-B, complete the following table. (Round FVA factors to 3 decimal places and final answers to the nearest whole dollar.) S S $ Annual Deposit $ 2,400 2,400 2,400 2,400 Rate of Return 3% 9% 5% 11% Answer is complete but not entirely correct. Number of Years 10 10 30 30 Investment Value at the End of Time Period S $ $ $ Total Amount of Investment 28,796 $24,000 54,149 X S 268,355 X $ 1,401,065 $ Total Amount of Earnings S S 24,000 72,000 $ 72,000 $ 4,796 X 30,149 X 196,355 x 1,329,065 xQuestion 1 For each of the followings, calculate the fair delivery price for the forward contract. a) A forward contract to buy 1,000 ounces of gold in two year's time. The spot gold price is $1226 per ounce, the riskless interest rate is 6% p.a. and storage/security costs for gold bullion are 4%. b) A forward contract to sell 1,000 ounces of gold in two year's time. All other details the same as (a). c) A forward contract for the delivery of 10,000 tonnes of wheat in five months. The spot price for wheat is $140 per tonne, the riskless rate is 6%, and storage costs are 2%. d) A forward contract on the Small Ordinaries Index for delivery in nine months. The Small Ords is currently 2020, the riskless rate is 6% p.a. and the expected dividend yield on the Small Ords is 4%. e) A forward contract to deliver 1,000 TST shares in nine month's time. TST is currently trading at $10 and is expected to pay a dividend of $0.90 in exactly five month's time. The risk-free rate of interest is 6% p.a.…
- ► CRC Inc. is buying new equipment that has the following cash flows: Year Cash Flow O-$17.7 What is the NPV if the interest rate is $6%? O $482.24 D -$537.78 0 -$500 O $22.44 1 $100 2 $200 3 $2505. Asset valuation and risk Laura Drake wishes to estimate the value of an asset expected to provide cash inflows of $3,000 per year at the end of years 1 through 4 and $ 1000 at the end of year 5. Her research indicates that she must earn 10% on low-risk assets, 15% on average-risk assets, and 22% on high- risk assets. a. Determine what is the most Laura should pay for the asset if it is classified as (1) low-risk, (2) average-risk, and (3) high-risk. b. Suppose Laura is unable to assess the risk of the asset and wants to be certain she's making a good deal. On the basis of your findings in part a, what is the most she should pay? Why? c. All else being the same, what effect does increasing risk have on the value of an asset? Explain in light of your findings in part a.QUESTION 4 For the cash flow given below, the annual uniform deposit (A) that yields an equal blance by the end of n =8 years is closest to: i= 12% 3 411 n-1 $500 $700 $900 $1100 A
- ces Year 0 1 Cash Flow (A) -$430,000 41,500 2 64,500 3 81,500 4 545,000 Cash Flow (B). -$ 42,500 20,900 12,800 21,100 17,900 The required return on these investments is 10 percent. a. What is the payback period for each project? Note: Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16. b. What is the NPV for each project? Note: Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16. c. What is the IRR for each project? Note: Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e. d. What is the profitability index for each project? Note: Do not round intermediate calculations and round your answers to 3 decimal places, e.g., 32.161. e. Based on your answers in (a) through (d), which project will you finally choose? a. Project A Project B b. Project A Project B years years Q Search < Prev 5 of 5 Next LWells, Inc., has identified an investment project with the following cash flows. Cash Flow $ 950 1,180 1,400 2,140 Year 1 ~34 2 a. If the discount rate is 8 percent, what is the future value of these cash flows in Year 4? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) b. What is the future value at an interest rate of 11 percent? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) c. What is the future value at an interest rate of 24 percent? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) a. Future value at 8 percent b. Future value at 11 percent Future value at 24 percent c.Nov 5.pdf Q Q Ara 2.56 Consider the cash flow series given in the accompanying table. What value of C makes the deposit series equivalent to the withdrawal series at an interest rate of 6% compounded annually? 5C 4C 3C 2C C 1 2 3 4 6. 8. 6. 10 $300 $600 $900 $1,200 $1,500 12.00 000 harrels of oil during
- QUESTION 3 A company has the project cashflow presented in the table below. If the inflation-free interest rate is 12% per year and the inflation rate is 4% per year, determine the Present Worth of the company's cashflow. Cashflow Item Amount First Cost -18,000 Annual Operating Cost Salvage Value No. of Years -7500 5000 10QUESTION 2 REQUIRED Use the information given below to calculate the following: 2.1 Payback Period of Project B (answer expressed in years, months and days). 2.2 Accounting Rate of Return (on average investment) of Project B (answer expressed to two decimal places). 2.3 Net Present Value of Project A (amounts rounded off to the nearest Rand.) 2.4 Internal Rate of Return of Project B, if the net cash flows are R120 000 per year for five years (answer expressed to two decimal places). INFORMATION The following information relates to two capital investment projects: Project A Project B Initial cost R400 000 R400 000 Expected useful life 5 years 5 years Scrap/Residual value R40 000 Depreciation per year R72 000 R80 000 Expected annual profits: R R End of: Year 1 100 000 45 000 Year 2 60 000 45 000 Year 3 50 000 45 000 Year 4 30 000 45 000 Year 5 20 000 45 000 The company estimates that its cost of capital is 15%.Assume a $290,000 investment and the following cash flows for two products: Year Product X 1 A234 4 $ 100,000 100,000 75,000 40,000 Product Y $ 90,000 100,000 Product X Product Y 80,000 40,000 a. Calculate the payback for products X and Y. Note: Do not round intermediate calculations. Round your answers to 2 decimal places. years years b. Which alternative would you select under the payback method? Product X is selected O Product Y is selected