Question 12 A company with $500,000 endowment has the following investment opportunities available: a. b. Project...
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Question 12 A company with $500,000 endowment has the following investment opportunities available: a. b. Project 1 2 3 4 5 C. d. e. 11 $160,000 $185,000 $163,000 $109,000 $225,000 Assuming perfect certainty, PCM, rational investors, a two-period world, and a market rate of 15%, answer the following questions: X2 $182,000 $205,000 $195,000 $125,000 $280,000 Which proposals should the company undertake? If the firm follows your advice, how much will be invested in period 1? What are the period 1 and period 2 dividends? What is the value of the firm after investing? Based on the answer to c., i. What is the maximum amount that an owner of 10% of company can consume in period 1? ii. If the owner from i. consumes $10,000 in period 1, how much will they consume in period 2? iii. If the owner from i. consumes $50,000 in period 1, how much will they consume in period 2? iv. If the owner from i. wants to consume $20,000 in period 2, how much can they consume in period 1? Question 12 A company with $500,000 endowment has the following investment opportunities available: a. b. Project 1 2 3 4 5 C. d. e. 11 $160,000 $185,000 $163,000 $109,000 $225,000 Assuming perfect certainty, PCM, rational investors, a two-period world, and a market rate of 15%, answer the following questions: X2 $182,000 $205,000 $195,000 $125,000 $280,000 Which proposals should the company undertake? If the firm follows your advice, how much will be invested in period 1? What are the period 1 and period 2 dividends? What is the value of the firm after investing? Based on the answer to c., i. What is the maximum amount that an owner of 10% of company can consume in period 1? ii. If the owner from i. consumes $10,000 in period 1, how much will they consume in period 2? iii. If the owner from i. consumes $50,000 in period 1, how much will they consume in period 2? iv. If the owner from i. wants to consume $20,000 in period 2, how much can they consume in period 1?
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I f the firm follows your advice how much will be invested in period 1 The firm will invest 160000 in proposal 1 185000 in proposal 2 and 163000 in proposal 3 in period 1 The net present value for eac... View the full answer
Related Book For
Income Tax Fundamentals 2013
ISBN: 9781285586618
31st Edition
Authors: Gerald E. Whittenburg, Martha Altus Buller, Steven L Gill
Posted Date:
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