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Palawan Financing has total assets worth $900 million and total liabilities worth $475 million at the end of December 31, 2016


34. Palawan Financing has total assets worth $900 million and total liabilities worth $475 million at the end of December 31, 2016. What is the amount of money received by the stockholders, if Palawan Financing liquidates all of its assets for $850 and pays off all of its outstanding debt?

a.$850 million

b.$475 million

c.$1,325 million

d.$425 million

e.$375 million


43. Anton is considering putting money in an investment plan that will pay him $52,000 in 12 years. If Anton's opportunity cost rate is 7 percent compounded annually, what is the maximum amount he should be willing to pay for the investment today?

a.$23,089

b.$25,526

c.$26,888

d.$28,685

e.$30,534


45. Suppose an investor wants to have $10 million to retire 45 years from now. How much would she have to invest today with an annual rate of return equal to 15 percent?

a.$18,561

b.$17,844

c.$20,003

d.$21,345

e.$19,552


Solutions

Expert Solution

Q-34)

Amount Received by Shareholders = Liquidation Value of Assets - Outstanding Liabilities

Amount Received by Shareholders = $850 - $475

Amount Received by Shareholders = $375

Option E

Q-43) Investment plan will pay a Future value of $52,000 in 12 years to Anton.

Calculating its Present Value today of the amount to be paid for Investment:-

Present Value = Future Value/(1+r)^n

where, n = no of years = 12

r = Interest rate = 7%

Present Value = $52,000/(1+0.07)^12

Present Value = $52,000/2.25219158896

Present Value = $23,088.62

Option A

-45) Future value required by Investor in 45 years = $10 million

Calculating its Present Value today:-

Present Value = Future Value/(1+r)^n

where, n = no of years = 45

r = Interest rate = 15%

Present Value = $10 million/(1+0.15)^45

Present Value = $10 million/538.769268988

Present Value = $18,560.82

Option A

jeff jeffy answered 2 years ago
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