Question
1. Mike is considering investing $28,500 in an investment that will have a maturity value of $42,500 in six years. If the interest is compounded
1. Mike is considering investing $28,500 in an investment that will have a maturity value of $42,500 in six years. If the interest is compounded monthly, what is the effective annual rate of return earned on the investment? (Round the answer to four decimal points)?
2. Compute the present value (PV) of an annuity that pays $320 forever if the opportunity cost rate is (a) 4 percent, and (b) 8 percent What is this type of annuity referred to? and why does the PV reduce as the rates increase?
3. Determine how many shares Warren must sell to net $250 million after flotation costs in raising new capital? Warren Inc. has a financial need to expand their business to new markets , thus they must raise $250 million. To do so, Warren Inc. expects to issue new common stock. Investment bankers have informed the company the flotation costs will be 5 percent of the total amount issued plus $500,000 in additional costs associated with the issue. Warren can issue its stock for $80 per share.?
4. Financial Leverage(borrowing) is said to be really advantageous to businesses, and even investors(stockholders) by its effect on the realized returns. However, it is also known to be "a double-edged sword" for firms
What do you understand this to mean ,if you are the owner or the financial analyst of a firm?
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