Questions from Corporate Finance


Q: Your firm spends $5000 every month on printing and mailing costs

Your firm spends $5000 every month on printing and mailing costs, sending statements to customers. If the interest rate is 0.5% per month, what is the present value of eliminating this cost by sending...

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Q: You have just entered an MBA program and have decided to pay

You have just entered an MBA program and have decided to pay for your living expenses using a credit card that has no minimum monthly payment. You intend to charge $1000 per month on the card for the...

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Q: Your credit card charges an interest rate of 2% per month

Your credit card charges an interest rate of 2% per month. You have a current balance of $1000, and want to pay it off. Suppose you can afford to pay off $100 per month. What will your balance be at t...

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Q: You have decided to buy a perpetuity. The bond makes one

You have decided to buy a perpetuity. The bond makes one payment at the end of every year forever and has an interest rate of 5%. If you initially put $1000 into the bond, what is the payment every ye...

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Q: You have just made an offer on a new home and are

You have just made an offer on a new home and are seeking a mortgage. You need to borrow $600,000. a. The bank offers a 30-year mortgage with fixed monthly payments and an interest rate of 0.5% per mo...

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Q: When a pharmaceutical company develops a new drug, it often receives

When a pharmaceutical company develops a new drug, it often receives patent protection for that medication, allowing it to charge a higher price. Explain how this public policy of providing patent pro...

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Q: Suppose you take the 30-year mortgage described in Problem 39

Suppose you take the 30-year mortgage described in Problem 39, part (a). How much will you still owe on the mortgage after 15 years? Data from Problem 39: You have just made an offer on a new home a...

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Q: You realize that the plan in Problem 42 has a flaw.

You realize that the plan in Problem 42 has a flaw. Because your income will increase over your lifetime, it would be more realistic to save less now and more later. Instead of putting the same amount...

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Q: You are 35 years old, and decide to save $5000

You are 35 years old, and decide to save $5000 each year (with the first deposit one year from now), in an account paying 8% interest per year. You will make your last deposit 30 years from now when y...

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Q: You have just turned 30 years old, have just received your

You have just turned 30 years old, have just received your MBA, and have accepted your first job. Now you must decide how much money to put into your retirement plan. The plan works as follows: Every...

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