Financial Management Homework Help

Several years ago, a man won $27 million in the state lottery. To pay off the winner, the state planned to make an initial $1 million payment today followed by equal annual payments of $1.3 million at the end of each year for the next 20 years. Just before receiving any money, the man offered to sell the winning ticket back to the state for a one-time immediate payment of $14.4 million. If the state uses a 6%/year MARR and a future worth analysis, should it accept the man's offer? What is the future worth of the state's original 20-year plan? $ What is the future worth of the man's one-time offer? $ Carry all interim calculations to 5 decimal places and then round your final answer to the nearest whole number (in millions of dollars). The tolerance is ±2.

Cost of Capital Calculate an estimate of the weighted-average cost of capital for Chick-fil-A, using the data previously provided. All of the relevant formulas are listed on the following page.

You are the chair of a nonprofit pottery studio, "You are Fired." The board has been offered the opportunity to purchase the studio space for $2,000,000, and can use part of its reserve fund to pay for the $400,000 down payment. It can get a twenty-year mortgage with end-of- month payments at a 4 percent annual rate of interest. Please answer the questions below: Format answers with commas to separate thousands, hundred thousands and provide decimal places as noted in the answer. a. How much will the organization have to finance with the mortage? Please round to two decimal places, e.g., 2,400,000.00 not 2,400,000. b. What is the effective periodic interest rate and number of periods for this mortage? • Periodic Interest Rate: (Please round to five digits (e.g., 0.0020, not 0.002 or 0.2 percent) • Number of Periods: (Please round to the one (e.g, 450 not 450.00) c. Use the information from (a) and (b) and the payment function in Excel to determine the amount of the mortgage payment. • PMT= $ (Please round to two decimal places)

Autopia is planning to issue a bond with a face (par) value of $40,000,000 and a stated interest rate (coupon rate) of 4 percent. Interest payments are made twice annually for a 30 year term. **Format all answers with commas to separate thousands, hundred thousands, millions, etc. Please format answers as indicated below. What will be the amount of each semi-annual interest payment on the bond? Please round to two decimal places (e.g., 500,000.00) How much can the New University expect to receive at bond issuance, assuming that the interest rate at issuance is the same as the coupon rate? Please round to two decimal places (e.g., 3,500,000.00) How much will Autopia receive if interest rates have increased to 4.5 percent at the time of issuance? Please round to two decimal places (e.g., 3,500,000.00)

The City Council of Radiator Springs is considering a proposal to encourage tourism through the development of a water park. The developers have asked the city to provide a grant of $1,000,000 to help pay for construction of the park. They claim that the park will increase sales and tourism taxes to the community in the amount of "at least" $60,000 per year for 20 years. The mayor, who supports the investment, claims that the grant will have a return on investment of 20 percent over the life of the project. Please format the answers as required below. A. Calculate the net present value of the proposed investment, with a discount rate of 4 percent (the current earning on Radiator Springs' investment portfolio). Record the answer rounded to the dollar (e.g., 250,000, not 250,000.00) (5 points) • NPV = B. What is the internal rate of return on this proposed investment? Please report the IRR as a decimal and not percentage, carried out to three decimal points (e.g., 0.025 or 0.037, not 2.5% or 3.7%) (5 points) • IRR =

Use the following short rate tree. Short rate can increase or decrease in 6 months by equal probability. Use semi-annual compounding. Now, consider a 1 year mortgage (semi-annually paid) with a mortgage rate of 10% (so that a semi-annual mortgage rate is 5%) and an initial principal balance of $20,000. The mortgage is divided into three sequential pay tranches. Tranche A receives the first $8,000 of the principal, tranche B receives the next $6,000 of the principal, and tranche C receives the remaining $6,000 of the principal. 1. Fill in the amortization schedule of the whole mortgage below. 2. Fill the scheduled payments to the A, B, and C tranches, assuming no prepayment. 3. Suppose that exactly 30% of mortgages will prepay in full after 6 months (0.5 year), regardless of the level of interest rates. Fill the amortization schedule based on the deterministic prepayment. 4. Compute the present value of the whole mortgage, tranche A, tranche B, and tranche C, respectively. 5. Briefly explain the difference between value-minimizing prepayment policy and deterministic prepayment policy and how you would value the mortgage under value-minimizing prepayment policy.

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3. (2 pts) The 90-day forward rate for the euro is $1.17, while the current spot rate of the euro is $1.15. What is the annualized forward premium or discount of the euro? A) 1.74 percent Discount.B) 1.74 percent Premium.C) 6.96 percent Discount.D) 6.96 percent Premium.

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Apply incremental B/C analysis at an interest rate of 8% per year to determine which alternative should be selected. Use a 20-year study period, and assume the damage costs might occur in year 6 of the study period.