Problem 2-17, What is the NPV?
Principles of Corporate Finance
Brealey, Myers, and Allen
13th Edition
Given a perpetuity, find the NPV of the investment.
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Given a perpetuity, find the NPV of the investment.
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Given an advertisement stating that you pay them for a certain number of years, and then they’ll pay you into perpetuity, determine the rate of interest if it is a fair deal.
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Given a cash dividend that is expected to increase indefinitely, determine the PV of the dividend stream.
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Given the interest rate, determine the PV of an asset, the approximate PV of an asset that pays a perpetuity in some future year, and finally, determine the value of a piece of land.
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Given discount factors, compute the interest rate, and vice versa. Finally, determine the discount factor given that you’ve solved for the annuity factor.
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Determine which company is offering you a better deal on a new car. The first company makes you pay monthly, while the second company gives you a discount off the list price.
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Compute their annual savings so that they can buy the boat.
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What income can Mr. Basset get each year until his death?
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Determine the amount you would be prepared to offer for the prize and estimate the rate of return that the Enhance Reinsurance Company was looking for when they made their offer.
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Given a discount rate, calculate the present value of an annuity, then redo the problem assuming that the first payment arrives in six months.
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