You're trying to save enough money to buy your first car which costs $2,500. You can save $100 at the end of each month starting from now. You currently have no money at all. You just opened a bank account with an interest rate of 6% pa payable monthly.
How many months will it take to save enough money to buy the car? Assume that the price of the car will stay the same over time.
Question 180 equivalent annual cash flow, inflation, real and nominal returns and cash flows
Details of two different types of light bulbs are given below:
- Low-energy light bulbs cost $3.50, have a life of nine years, and use about $1.60 of electricity a year, paid at the end of each year.
- Conventional light bulbs cost only $0.50, but last only about a year and use about $6.60 of energy a year, paid at the end of each year.
The real discount rate is 5%, given as an effective annual rate. Assume that all cash flows are real. The inflation rate is 3% given as an effective annual rate.
Find the Equivalent Annual Cost (EAC) of the low-energy and conventional light bulbs. The below choices are listed in that order.
Which of the following companies is most suitable for valuation using PE multiples techniques?
Question 469 franking credit, personal tax on dividends, imputation tax system, no explanation
A firm pays a fully franked cash dividend of $70 to one of its Australian shareholders who has a personal marginal tax rate of 45%. The corporate tax rate is 30%.
What will be the shareholder's personal tax payable due to the dividend payment?
A firm is considering a business project which costs $10m now and is expected to pay a single cash flow of $12.1m in two years.
Assume that the initial $10m cost is funded using the firm's existing cash so no new equity or debt will be raised. The cost of capital is 10% pa.
Which of the following statements about net present value (NPV), internal rate of return (IRR) and payback period is NOT correct?
Question 908 effective rate, return types, gross discrete return, return distribution, price gains and returns over time
For an asset's price to double from say $1 to $2 in one year, what must its gross discrete return (GDR) be? If the price now is ##P_0## and the price in one year is ##P_1## then the gross discrete return over the next year is:
###\text{GDR}_\text{annual} = \dfrac{P_1}{P_0}###The required return of a building project is 10%, given as an effective annual rate. Assume that the cash flows shown in the table are paid all at once at the given point in time.
The building firm is just about to start the project and the client has signed the contract. Initially the firm will pay $100 to the sub-contractors to carry out the work and then will receive an $11 payment from the client in one year and $121 when the project is finished in 2 years. Ignore credit risk.
But the building company is considering selling the project to a competitor at different points in time and is pondering the minimum price that they should sell it for.
Project Cash Flows | |
Time (yrs) | Cash flow ($) |
0 | -100 |
1 | 11 |
2 | 121 |
Which of the below statements is NOT correct? The project is worth: