FIN 615 WEEK 7 HOMEWORK

FIN 615 WEEK 7 HOMEWORK

Subject: Business    / Finance
Question
You start a new job. They give you a variety of investments for your 401K
plan. You have 4 choices
A money market fund that historically has returned 2.5% per year
A long term bond fund with an average annual return of 6%
A conservative common stock fund that has earned 8% per year.
An aggressive common stock fund that has earned 14% per year.
If you want to contribute $5000 per year for the next 20 years, how much will
you have with each of the options? Yreka Pag paper company is a big producer of paper products. Due to its
increased use of recycled materials, analysts expect that the firms earnings
and dividends will grow at 15% per year for the next 5 years. After that,
analysts believe that competitors will catch up so the growth rate will decline
to a historical run rate of 8%. If their most recent dividend (Do) is .35 and the
required rate of return is 12%, what is the value of the stock today. If a company just paid a dividend of $2.00 per share, the required
rate of return is 9% and the growth rate is 3% then the value of the
stock is You decide to buy a small office building with 1 tenant. The tenant has a
lease that calls for monthly rent payments of $2,500 per month for the
next 6 years. After that, the lease expires. You expect to be able to
increase the rent 4% per year for years 7-12. At the end of year 12 you
intent to sell the building for $200000
Create a table showing the projected cash flows for the investment,
assuming the next rental payment occurs one month from today.
Assuming you need to earn 11% on this investment, what is the
maximum price you would be willing to pay for the building today?
(ignore taxes and amortization for this analysis) You want to buy a house with a $30,000 down payment. The
loan amount is $297,000. The annual interest rate is 3 ¾ % and
the loan is for 360 months. What are your payments? Find the the value of a preferred stock with a 6% coupon and $100 par
value with a required rate of return of 10%. Calculate the yield to maturity of a 10% coupon bond with 5 years to maturity if the bond sells
for $927.91. The face value of the bond is $1,000. Assume semiannual coupon payments. If a new company is expected to growth exponentially and pay dividends of $1,
$2, and $3, for the first 3 years, respectively. After that time the growth is
expected to be at 5% thereafter. The required rate of return is 10%. You can
use the PV and the Gordon Growth model to estimate the value of the stock.