Questions from Corporate Finance

Q: You figure that the total cost of college will be $100

You figure that the total cost of college will be $100,000 per year 18 years from today. If your discount rate is 8% compounded annually, what is the present value today of 4 years of college costs st...

Q: Assume that Social Security promises you $40,000 per year

Assume that Social Security promises you $40,000 per year starting when you retire 45 years from today (the first $40,000 will come 45 years from now). If your discount rate is 7%, compounded annually...

Q: When Alex Rodriguez moved to the Texas Rangers in 2001, he

When Alex Rodriguez moved to the Texas Rangers in 2001, he received a lot of attention for his “$252 million” contract (the total of the payments promised was $252...

Q: You are trying to decide how much to save for retirement.

You are trying to decide how much to save for retirement. Assume you plan to save $5000 per year with the first investment made 1 year from now. You think you can earn 10% per year on your investments...

Q: A rich relative has bequeathed you a growing perpetuity. The first

A rich relative has bequeathed you a growing perpetuity. The first payment will occur in a year and will be $1000. Each year after that, you will receive a payment on the anniversary of the last payme...

Q: You are thinking of building a new machine that will save you

You are thinking of building a new machine that will save you $1000 in the first year. The machine will then begin to wear out so that the savings decline at a rate of 2% per year forever. What is the...

Q: The British government has a consol bond outstanding paying £100 per

The British government has a consol bond outstanding paying £100 per year forever. Assume the current interest rate is 4% per year. a. What is the value of the bond immediately after a payment is made...

Q: Colgate-Palmolive Company has just paid an annual dividend of $

Colgate-Palmolive Company has just paid an annual dividend of $0.96. Analysts are predicting an 11% per year growth rate in earnings over the next five years. After then, Colgate’s earnings are expect...

Q: When Alfred Nobel died, he left the majority of his estate

When Alfred Nobel died, he left the majority of his estate to fund five prizes, each to be awarded annually in perpetuity starting one year after he died (the sixth one, in economics, was added later)...

Q: You work for a pharmaceutical company that has developed a new drug

You work for a pharmaceutical company that has developed a new drug. The patent on the drug will last 17 years. You expect that the drug’s profits will be $2 million in its first year and that this am...