Finance Question Dr Jones New Building

Finance Question Dr Jones New Building in $10 OnlyFinance Question Dr Jones New Building

Dr Jones decides that on December 31st he is going to purchase new building at $225,000. He agrees’ to put 20% down and make 18 equal annual installments that are to include the principal plus 15% compounding interest on the declining balance.

Answer the following:

How much are the equal installments?

What are the total payments of this investment?

Observations about the investment?

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Investment Portfolio of Rothman Corp.

Investment Portfolio of Rothman Corp. in $15 only

Part 1 – Investments

Below is information regarding the investment portfolio of Rothman Corp. Use the straight-line method to amortize any bond discount or premium.

  • On January 1, 2013, Rothman Company purchased the bonds of Griffen Corp at 97. The 8% bonds had a face value of $800,000 and mature in five years. Rothman had intended to hold them for five years, but may need to sell them sooner in order to free up cash for a construction project. The bonds had a fair value of $770,000 on December 31, 2013 and a fair value of $870,000 on December 31, 2014.
  • On February 1, 2013, Rothman Company purchased 500 of the 10,000 outstanding shares of Sanchez Company common stock for $26.50 per share. On December 31, 2013, the stock had a fair value of $29.50 per share. On December 31,2014 the stock had a fair value of $33.20 per share. Rothman plans to hold the stock for several years until they can acquire 20% of Sanchez Company’s stock. Sanchez had net income of $350,000 and paid dividends of $20,000 in 2013 and had net income of $470,000 and paid $35,000 in dividends in 2014.
  • On February 9, 2013, Rothman purchased 1,000 of the 10,000 shares of Cushman Company common stock for $110 per share. Rothman had intended to hold the stock for several years. On December 31, 2013, Cushman Corp stock had a fair value of $75 per share. On September 15, 2014 Rothman sold all of its 1,000 shares of Cushman Corp stock for $85 per share to avoid any further losses from the decline in the stock price.

Weighted Average Cost of Capital (WACC) for Golden Gate construction Associates

Weighted Average Cost of Capital (WACC) for Golden Gate construction Associates

Golden Gate Construction Associates, a real estate developer and building contractor in San Francisco, has two sources of long-term capital: debt

and equity. The cost to Golden Gate of issuing debt is the after-tax cost of the interest payments on the debt, taking into account the fact that the interest payments are tax deductible. The cost of Golden Gate’s equity capital is the investment opportunity rate of Golden Gate’s investors, that is, the rate they could earn on investments of similar risk to that of investing in Golden Gate Construction Associates. The interest rate on Golden Gate’s $90 million of long-term debt is 10 percent, and the company’s tax rate is 40 percent. The cost of Golden Gate’s equity capital is 15 percent. Moreover, the market value (and book value) of Golden Gate’s equity is $135 million. Required: Calculate Golden Gate Construction Associates’ weighted-average cost of capital

Answer available.

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Finance Questions Related to PV, FV, FVOA & NPV

Finance Questions Related to PV, FV, FVOA & NPV in $2.50 only

1. Calculate the future value of 1,535 invested today for 8 years at 6 percent.

2. What is the total present value of the following cash stream, discounted at 8 percent?

Year    1       2      3      4       5

Amt   400   750  945  145   78

3. If you invested $2,000 per year into an IRA for 30 years and received 6 percent return each year, what would the account balance be in 30 years?

4. A friend gives you a proposition. If you give him 1,500 dollars today, he will guarantee your receive 12 percent a year for the next 5 years. How much money will you receive from him at the end of 5 years?

5. You want to buy a new Computer Aided Design (CAD) system for your business. The cost of the system is $150,000 and you expect to save over $40,000 per year in reduced labor costs. Please calculate the net present value of the CAD if your required return is 10 percent and the life of the system is expected to be 5 years.

6. Your company is considering converting its heating system in the main office from coal to heating oil. The initial cost of removing the coal fired furnace and installing an new oil fired unit is $60,000. The life of the analysis is 7 years. In the past you spent $25,000 per year on coal. The new company says you will spend no more than $15,000 per year on heating oil. If your required return is 12 percent, should you make this investment? Please calculate the net present value of this project.

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