The Harris Company is the lessee on a four-year lease with the following payments at the end of each year: Year 1: $ 17,000 Year 2: $ 22,000 Year 3: $ 27,000 Year 4: $ 32,000 An appropriate discount rate is 7 percentage, yielding a present value of $81,556. 1. If the lease is an operating lease, what will be the initial value of the right-of-use asset? 2. If the lease is an operating lease, what will be the initial value of the lease liability? 3. If the lease is an operating lease, what will be the lease expense shown on the income statement at the end of year 1?
In: Finance
In: Finance
A stock price is currently $50. It is known that at the end of one year it will be either $40 and $60. The exercise price of a one-year European call option is $55. The risk-free interest rate is 5% per annum.
a. Construct a binomial tree to show the payoff of the call option at the expiration date.
b. Based on the binomial tree model, what is the value of the call option?
c. Address the relation between the binomial tree model and the Black-Scholes model.
In: Finance
A stock price is currently $50. It is known that at the end of one year it will be either $40 and $60. The exercise price of a one-year European call option is $55. The risk-free interest rate is 5% per annum. Construct a binoamial tree to show the payoff of the call option at the expiration date. (5%) Based on the binomial tree model, what is the value of the call option? (15%) Address the relation between the binomial tree model and the Black-Scholes model. (5%)
In: Finance
A company is obligated to pay its creditors $6,145 at the end of the year. If the value of the company's assets equals $5,863 at that time, what is the value of shareholders' equity?
In: Finance
Biotech company is considering buying a machine. The cashflows at the beginning of the year for each machine are shown in the following table. Assume a rate of return of 12%. Find the IRR and NPV of each machine. Which machine should Biotech buy? Do the machines have a unique IRR? Justify your answers.
|
Time |
Year 0 |
Year 1 |
Year 2 |
Year 3 |
Year 4 |
|
Machine 1 |
-150 |
20 |
130 |
50 |
26 |
|
Machine 2 |
-90 |
-90 |
200 |
36 |
36 |
In: Finance
Given the information in the table, what is the price of the stock in YEAR 1?
|
Today’s Dividend |
$3.10 |
|
Discount Rate |
6.59% |
|
Growth rate in dividends 0 to 1 |
8.24% |
|
Growth rate in dividends 1 to 2 |
7.28% |
|
Growth rate in dividends 2 to 3 |
5.50% |
|
Growth rate in dividends 3 onward |
4.26% |
In: Finance
In: Finance
You put up $50 at the beginning of the year for an investment. The value of the investment grows 5.0%, and you earn a dividend of $4.4. What was your holding period return (HPR)?
Enter answer in percents, accurate to two decimal places.
In: Finance
Assume a farmer takes out a five year loan for $50,000. The annual interest rate is 4% and the farmer will make equal annual principal payments for years one through five. Approximately how much interest will be paid over the life of the loan? Round all numbers to the nearest whole dollar.
A. 6160
B. 56000
C. 56160
D.6000
In: Finance