The required return of a 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.
What is the Net Present Value (NPV) of the project?
| Project Cash Flows | |
| Time (yrs) | Cash flow ($) |
| 0 | -100 |
| 1 | 11 |
| 2 | 121 |
You want to buy an apartment worth $500,000. You have saved a deposit of $50,000. The bank has agreed to lend you the $450,000 as a fully amortising mortgage loan with a term of 25 years. The interest rate is 6% pa and is not expected to change.
What will be your monthly payments?
A four year bond has a face value of $100, a yield of 6% and a fixed coupon rate of 12%, paid semi-annually. What is its price?
A new company's Firm Free Cash Flow (FFCF, same as CFFA) is forecast in the graph below.
To value the firm's assets, the terminal value needs to be calculated using the perpetuity with growth formula:
###V_{\text{terminal, }t-1} = \dfrac{FFCF_{\text{terminal, }t}}{r-g}###
Which point corresponds to the best time to calculate the terminal value?
Over the next year, the management of an unlevered company plans to:
- Make $5m in sales, $1.9m in net income and $2m in equity free cash flow (EFCF).
- Pay dividends of $1m.
- Complete a $1.3m share buy-back.
Assume that:
- All amounts are received and paid at the end of the year so you can ignore the time value of money.
- The firm has sufficient retained profits to legally pay the dividend and complete the buy back.
- The firm plans to run a very tight ship, with no excess cash above operating requirements currently or over the next year.
How much new equity financing will the company need? In other words, what is the value of new shares that will need to be issued?
The current gold price is $700, gold storage costs are 2% pa and the risk free rate is 10% pa, both with continuous compounding.
What should be the 3 year gold futures price?
Question 711 continuously compounding rate, continuously compounding rate conversion
A continuously compounded semi-annual return of 5% ##(r_\text{cc 6mth})## is equivalent to a continuously compounded annual return ##(r_\text{cc annual})## of:
Question 734 real and nominal returns and cash flows, inflation, DDM, no explanation
An equities analyst is using the dividend discount model to price a company's shares. The company operates domestically and has no plans to expand overseas. It is part of a mature industry with stable positive growth prospects.
The analyst has estimated the real required return (r) of the stock and the value of the dividend that the stock just paid a moment before ##(C_\text{0 before})##.
What is the highest perpetual real growth rate of dividends (g) that can be justified? Select the most correct statement from the following choices. The highest perpetual real expected growth rate of dividends that can be justified is the country's expected:
Find the Macaulay duration of a 2 year 5% pa semi-annual fixed coupon bond which has a $100 face value and currently has a yield to maturity of 8% pa. The Macaulay duration is: