Finance

Question 1

Q1
APR 16.70%
rate weekly 0.32%
Term for the amount to triple
Weeks 342.6318809
Years 6.59

Weeks

Years

Question 2

Agency problem in finance include CEO compensation along with the dividend declaration. Keeping the Compensations too high may benefit the CEO but as he is the agent so it would cause the organization to suffer and dividend declaration if made in a large portion of profit can result in low financing for the organization from internal means, and vice versa. hence these two problems cause agency problems in the finances of the company.

Question 3

a

True, as the shareholder’s equity only tells the numbers that are crunched when equity was issued, or profit was retained, but the market capitalization denotes the real market worth of the company if all of the shares are sold. This accommodates the thought of potential price factors that incorporates the valuation of the business enterprise

b

False, it makes sense if the market rate for bond falls and the coupon rate on the bond is more than the market rate, in that case an investor may and would buy a $1,000 bond for $1,200

c

False, Since the payment is made at the end of the project, the higher the interest rate goes, the higher would be the discounting and as a result the present value would decrease more, this would cause the project’s NPV and IRR to be higher than the respective amounts before the increase in interest rate.

Question 4

term 10 years
11th year  $             50,000,000
Increment 1%
Interest Rate 3%
Value in 11th year  $       2,500,000,000
Present Value  $       1,860,234,787
Set Aside  $       1,860,234,787
FV at 11th year  $       2,500,000,000

Present Value to be put aside

Question 5

EAR 0.70%
Inflation 2%
a
Expected Return -1.27%
b
expected Return in investment
-1.27%
Expected Return in Safe
-1.96%

a. Expected Return

b. Expected return in safe

It is better to invest if the amount is not invested the rate of real return is -1.96% and in the second case the rate of return is -1.27&. There is a lesser loss in investing.

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