### An employee works at the local hamburger restaurant

An employee works at the local hamburger restaurant for 40 years and never earns more than minimum wage, which is $12,000 a year. However, this employee is able to save 6% per year, or $720 per year. Over the 40 year period, the employee’s investments average 8% interest per year. How much will the employee

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### What is the value of a share of a firm’s stock when the firm is expected

1. What is the value of a share of a firm’s stock when the firm is expected to pay $2.80 per share dividend at the end of each year and the annual discount rate is 7.5 percent? 2. What is the present value of a lease on a warehouse, where the tenants have a lease

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### Your cost of capital is 11 percent, and here is the offer:

Your cost of capital is 11 percent, and here is the offer: You put in $900 per year for the first 11 years (years 1 through 11) and our company will pay you $2500 for the following 22 years (years 12 through 33). All payments will be made at the end of the year. You

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### The corporation projects to pay a dividend

The corporation projects to pay a dividend of $0.75 next year and then have it grow at 12% for the next 3 years, before growing at 8% indefinitely thereafter. the equity has a required return of 10% in the market. What should the price of the stock be?

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### Calculating Annuities Due

Calculating Annuities Due You want to buy a new sports car from Muscle Motors for $32,000. The contract is in the form of a 72-month annuity due at a 7.75 percent APR (compounded monthly). Your monthly payment will be $? . (Round your answer to 2 decimal places, e.g. 32.16.) _______________________________________________________________________________ Calculating the Number of

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### You are evaluating two different sound mixers.

You are evaluating two different sound mixers. The Jazzmaster costs $45,000, has a three-year life, and costs $5,000 per year to operate. The Discmaster costs $65,000, has a five-year life, and costs $4,000 to operate. The relevant discount rate is 12%. Ignoring depreciation and taxes, compute the EAC for both. Which do you prefer?

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### We are examining a new project.

We are examining a new project. We expect to sell 500 units per year at $20 net cash flow a piece for the next 10 years. In other words, the annual operating cash flow is projected to be $20 x 500 = $10,000 per year. The relevant discount rate is 20%, and the initial investment

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### You are willing to pay $15,625 to purchase a perpetuity

You are willing to pay $15,625 to purchase a perpetuity which will pay you and your heirs $1,250 each year, forever. If your required rate of return does not change, how much would you be willing to pay if this were a 20-year, annual payment, ordinary annuity instead of a perpetuity?

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### Janice would like to send her parents on a cruise for their 25th wedding anniversary.

Janice would like to send her parents on a cruise for their 25th wedding anniversary. She has priced the cruise at $15,000 and she has 5 years to accumulate this money. How much must Janice deposit annually in an account paying 10 percent interest in order to have enough money to send her parents on

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### You want to buy a condo 5 years from now, and you plan to save $3,000 per year

You want to buy a condo 5 years from now, and you plan to save $3,000 per year, beginning one year from today. You will deposit the money in an account that pays 6% interest. How much will you have just after you make the 5th deposit, 5 years from now?

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