excel assignment
Problem 1
| Rasmussen College - F490c - Module 03 Assignment | |
| Problem 1 | |
| 1. | Your grandfather gives you a choice for your college money. He will either give you a) $2000 one year from now, or b) $3000 four years from now. Which option would you choose if the discount rate is currently 10%? Show your calculations. |
| a) or b)? |
Problem 2
| Rasmussen College - F490c - Module 03 Assignment | ||
| Problem 2 | ||
| 2. | Your company bought a machine a year go at the cost of $12,000. You as the financial manager estimated the machine's useful life (straight line depreciation) at 6 years with no salvage value. Today, a new, more efficient machine costs $21,000 with an estimated life of 5 years (straight line depreciation) and no salvage value. If you sell the old machine now, a scrap dealer is offering $10,000. The new machine is expected to generate incremental cash flow of $2,680 per year. Would you go ahead and buy the new machine or keep the old one running? Explain your calculations. | |
| Discount rate: | 8% |
Explanation:
Problem 3
| Rasmussen College - F490c - Module 03 Assignment | ||
| Problem 3 | ||
| 3. | What is the price of the bond with the following assumptions? | |
| Compounding: | Semiannual | |
| Coupon rate: | 10% | |
| YTM: | 5 | |
| Par: | $ 1,000 | |
| Interest rate: | 12% | |
| Bond Price: |
Problem 4
| Rasmussen College - F490c - Module 03 Assignment | |
| Problem 4 | |
| 4. | Your company paid a $2.50 dividend per share at the end of the year. The dividend is expected to grow by 10% each year for the next 3 years. The stock market price per share is expected to be $50 at the end of the third year. The market requires a 14% return. What is the price per share now? |
| Share price: | |
Problem 5
| Rasmussen College - F490c - Module 03 Assignment | ||
| Problem 5 | ||
| 5. | Use any of the capital budgeting decision rules to determine whether or not to accept the following investment. Assume the cost of capital of 14%. Explain your reasoning. | |
| Investment | ||
| Year | Cash Flow | |
| 0 | $ (31,000) | |
| 1 | $ 10,000 | |
| 2 | $ 20,000 | |
| 3 | $ 10,000 | |
| 4 | $ 10,000 | |
| 5 | $ 5,000 |
Explanation: