Advance Finance Insert Name Insert Institution Advance Finance Question 1: Periodic Interest Rates Calculating Periodic Rate and Effective Annual Interest Rate Applied Formula by Fouque and Papanicolaou (2011): Effective interest rate per period, (i) = ( 1 + ( r / m ) )m – 1 Effective interest rate for t periods, it = ( 1 + i )t - 1 or a single equation it = ( 1 + ( r / m ) )mt - 1. The rate per compounding period P = R / m, in percent. Where: r = R/100 and i = I/100 (p. 124)
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Cite all resources consistent with APA guidelines. Term Definition Resource you used Time value of money Is the idea that money available at a present time is worth a lot more then the amount that its is in the future due to the “potential earning capacity”. The core principle of finance is provided money is able to earn interest and any money received sooner is worth more. Investopedia - Time Value of Money - TVM. (2014). Retrieved from http://www.investopedia.com/terms/t/timevalueofmoney.asp
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required tonnage of shipping capacity to fulfill the various contracts held with Superior. Although the agents tried to arrange for ships to arrive at Thunder Bay in a steady stream, the vagaries of lockage transfer times in the Seaway resulted in quite variable arrival times, at times forcing arriving ships to anchor when both wharfs were busy. This resulted in SGE having to incur demurrage charges at a rate of $2000 per day. Mike Armstrong, manager of port facilities for SGE, had just learned that
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Chapter 5 A1. (Bond valuation) A $1,000 face value bond has a remaining maturity of 10 years and a required return of 9%. The bond’s coupon rate is 7.4%. What is the fair value of this bond? Calculating PV factor: i= required return = 9% = 0.09 n= 10 years Using Cash Flow of $1000 to calculate present value, Cash flow= $1000 PV factor = 1/(1+i)^n = 0.42241 PV = $1000*0.42241= 422.41 Using Coupon Rate to calculate present value of
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value to shareholders is achieved by increasing the price of existing ordinary shares. This market price reflects the value of the firm as seen by its owners. An accountant’s position within a corporation can have numerous responsibilities with equal importance. The majority of attention for an accountant is indeed conferred to the company’s balance sheets and profit and loss statements as these are vital in maintaining control over the company’s financial position; however accountants play a vital
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Finally, based on these assumptions, the NPV of the project would be: 1228,485 2. What is the Internal Rate of Return (IRR) of this project? The internal rate of return is the rate that would make the net present value of the firm’s project equal to zero. In other words, the IRR is the rate that would make the decision of investing or not in this project indifferent for the company. In order to calculate the IRR we started by computing the Free Cash Flows (FCF) for every single year.
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SOME USEFUL FORMULAS Rights R + S = X R = {N( M-S )}/(N+1 ) X = ( NM + S )/(N+1 ) Financial Future Value FV = PV (1 + i)n Present Value PV = FV (1 + i)-n Annuity Future Value FV = PMT {[(1 + i)n - 1]/ i} Annuity Present Value PV = PMT {[1 - (1 + i)-n]/ i} Perpetuity PV = Pmt /i Dividends No growth P0 = d1 /r Dividends constant growth P0 = d1 /(r - g) Effective interest rate ie = (1 + i)m - 1 Net Present Value NPV = PV of future cash flows less Cost of
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Taxable Pay: 1157.50 SS Tax: 71.77 (1157.50 *.062) Medicare Tax: 16.78 (1157.50 *.0145) FIT: 91.79 Net Pay: 977.17 FIT calcualted as follows: Taxable less allowances (1157.50 less (71.15*4) = 872.9 9. * .15)-39.15 = 91.79 7. Total money Lisa Kane borrowed = $ 8000 Interest on 60-day note = 8% Balance to return = $8000 + 8% of $8000 = $8640 After 45 days Lisa paid $2000 so amount left =$8640-$2000 = $ 6640 On 45th Day Lisa Paid $1000
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received at time T (note that, if cash flows are to be received forever, then T = ∞). Let CFt be the cash flow to be received at time t, and let rt be the appropriate discount rate for the period from now to time t. Then, [pic] Special cases: i) Time periods between cash flow payments are of equal length ii) The discount rate is the same for all periods (rt = r) [pic] iii) The discount rate is the same for all periods (rt = r), cash flows for times from next period
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Week 2: Text Problems University of Phoenix FIN/GM571 International Corporate Finance Chapter 4 A9. (Rate of return) After graduation, Adrian moved across the country to Brownville and bought a small house for $208,000. Bill moved to Columbus and bought a house for $195,000. Four years later, they both sold their houses. Adrian netted $256,000 when she sold her house and Bill netted $168,000 on his. a. What annual rate of return did Adrian realize on her house? b
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