Question

In: Finance

Your investment firm is offering you payments of $55,000 a year, at a price of $310,000....

Your investment firm is offering you payments of $55,000 a year, at a price of $310,000. If your required return is 5.5%, what is the minimum length of time you must receive these payments to make it a good deal for you?

Solutions

Expert Solution

The calculation for minimum length of time is shown below

Following shows the working


Related Solutions

A firm is considering a project that requires an initial investment of $55,000. The project is...
A firm is considering a project that requires an initial investment of $55,000. The project is expected to generate revenues of $80,000 per year for three years. Operating expenses will be 65% of revenues. The equipment will be depreciated on a straight-line basis to a zero net salvage value. The equipment will have a life of 3 years. The project feasibility study, which was just completed, cost $35,000. The project requires an initial investment in working capital of $5,000. Further...
You are attempting to price a 25 year annuity due for your insurance company. Payments of...
You are attempting to price a 25 year annuity due for your insurance company. Payments of $3,500 for this annuity due start at the beginning of each year. What is the lowest price your company should offer show all your works
A five-year project has an initial fixed asset investment of $310,000, an initial NWC investment of...
A five-year project has an initial fixed asset investment of $310,000, an initial NWC investment of $30,000, and an annual OCF of -$29,000. The fixed asset is fully depreciated over the life of the project and has no salvage value. If the required return is 11 percent, what is this project’s equivalent annual cost, or EAC?
Enviro Company issues 8%, 10-year bonds with a par value of $310,000 and semiannual interest payments....
Enviro Company issues 8%, 10-year bonds with a par value of $310,000 and semiannual interest payments. On the issue date, the annual market rate for these bonds is 10%, which implies a selling price of 87 1⁄2. The straight-line method is used to allocate interest expense. 1. Using the implied selling price of 87 ½, what are the issuer's cash proceeds from issuance of these bonds? 2. What total amount of bond interest expense will be recognized over the life...
You plan to purchase a $310,000 house using a 15-year mortgage obtained from your bank. The...
You plan to purchase a $310,000 house using a 15-year mortgage obtained from your bank. The mortgage rate offered to you is 5.10 percent. You will make a down payment of 20 percent of the purchase price. a. Calculate your monthly payments on this mortgage. b. Construct the amortization schedule for the mortgage. How much total interest is paid on this mortgage?    Construct the amortization schedule for the mortgage? (Do not round intermediate calculations. Round your answers to 2...
The bank is offering a 30-year mortgage that requires annual payments and has an interest rate of 6% per year. What will be your annual payment if you sign this mortgage?
You are thinking of purchasing a house. The house costs $250,000. You have $36,000 in cash that you can use as a down payment on the house, but you need to borrow the rest of the purchase price.The bank is offering a 30-year mortgage that requires annual payments and has an interest rate of 6% per year. What will be your annual payment if you sign this mortgage?
You are analyzing an investment opportunity for your firm. The investment will cost $10,000 to undertake...
You are analyzing an investment opportunity for your firm. The investment will cost $10,000 to undertake and will produce a cashflow of $2000 at the end of every year for the next 6 years. What is the internal rate of return? Select one: a. About 4% b. About 4.5% c. About 5% d. About 5.5% e. None of the above.
Suppose your firm is seeking a six-year, amortizing $700,000 loan with annual payments and your bank...
Suppose your firm is seeking a six-year, amortizing $700,000 loan with annual payments and your bank is offering you the choice between a $740,000 loan with a $40,000 compensating balance and a $700,000 loan without a compensating balance. The interest rate on the $700,000 loan is 9.0 percent. How low would the interest rate on the loan with the compensating balance have to be for you to choose it?(Do not round intermediate calculations and round your final answer to 2...
Johnson, Inc. projects sales for next year will be 55,000 units if the sales price is...
Johnson, Inc. projects sales for next year will be 55,000 units if the sales price is $27.50. At this level, unit fixed costs will be $8.30 while total variable costs will be $693,000. The vice president of marketing advises management to reduce sales price to $26.00 and to undertake a national advertising campaign costing $12,000. What is the breakeven point for the company in terms of dollars and units before giving effect to the vice president's plan? What is the...
Hack Wellington Co. is considering a three-year project that will require an initial investment of $55,000.
Hack Wellington Co. is considering a three-year project that will require an initial investment of $55,000. It has estimated that the annual cash flows for the project under good conditions will be $40,000 and $7,000 under bad conditions. The firm believes that there is a 60% chance of good conditions and a 40% chance of bad conditions.1. If the firm is using a weighted average cost of capital of 13%, the expected net present value (NPV) of the project is$4,553$7,037$5,381$8,279Hack...
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT