Questions from Corporate Finance

Q: Your job pays you only once a year for all the work

Your job pays you only once a year for all the work you did over the previous 12 months. Today, December 31, you just received your salary of $50,000 and you plan to spend all of it. However, you want...

Q: What is the relationship between the value of an annuity and the

What is the relationship between the value of an annuity and the level of interest rates? Suppose you just bought a 15-year annuity of $9,000 per year at the current interest rate of 10 percent per ye...

Q: You’re prepared to make monthly payments of $340, beginning at

You’re prepared to make monthly payments of $340, beginning at the end of this month, into an account that pays 6 percent interest compounded monthly. How many payments will you have made when your ac...

Q: Could a company’s cash flow to stockholders be negative in a given

Could a company’s cash flow to stockholders be negative in a given year? Explain how this might come about. What about cash flow to creditors?

Q: You want to borrow $73,000 from your local bank

You want to borrow $73,000 from your local bank to buy a new sailboat. You can afford to make monthly payments of $1,450, but no more. Assuming monthly compounding, what is the highest rate you can af...

Q: You need a 30-year, fixed-rate mortgage to

You need a 30-year, fixed-rate mortgage to buy a new home for $240,000. Your mortgage bank will lend you the money at a 6.35 percent APR for this 360-month loan. However, you can afford monthly paymen...

Q: The present value of the following cash flow stream is $6

The present value of the following cash flow stream is $6,550 when discounted at 10 percent annually. What is the value of the missing cash flow? Year ……………………….…………… Cash Flow 1………………………………………………………...

Q: You just won the TVM Lottery. You will receive $1

You just won the TVM Lottery. You will receive $1 million today plus another 10 annual payments that increase by $500,000 per year. Thus, in one year, you receive $1.5 million. In two years you get $2...

Q: You have just purchased a new warehouse. To finance the purchase

You have just purchased a new warehouse. To finance the purchase, you’ve arranged for a 30-year mortgage loan for 80 percent of the $2,900,000 purchase price. The monthly payment on this loan will be...

Q: Consider a firm with a contract to sell an asset for $

Consider a firm with a contract to sell an asset for $165,000 four years from now. The asset costs $94,000 to produce today. Given a relevant discount rate on this asset of 13 percent per year, will t...