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Chapter 4: Question: (page 281)
What is the present value of a. $7,900 in 10 years at 11 percent?
Answer
The present value is $2,782.26.
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Question: Mrs. Crawford will receive $7,600 a year for the next 19 years from her trust. If a 14 percent interest rate is applied, what is the current value of the future payments?
You invest $3,000 for three years at 12 percent.
a. What is the value of your investment after one year?
Your father offers you a choice of \(105,000 in 12 years or \)47,000 today. a. If money is discounted at 8 percent, which should you choose?
Question:BioScience Inc. will pay a common stock dividend of $3.20 at the end of the year (D1). The required return on common stock (Ke) is 14 percent. The firm has a constant growth rate (g) of 9 percent. Compute the current price of the stock (P0).
Terrier Company is in a 40 percent tax bracket and has a bond outstanding that yields 10 percent to maturity. a. What is Terrier’s aftertax cost of debt? b. Assume that the yield on the bond goes down by 1 percentage point, and due to tax reform, the corporate tax rate falls to 25 percent. What is Terrier’s new aftertax cost of debt? c. Has the aftertax cost of debt gone up or down from part a to part b? Explain why
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