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#24 htermediate Problems 23. Jack Hammer invests in a stock that will pay dividends of $2.00 at the end of the first year; $2.20 at

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htermediate Problems 23. Jack Hammer invests in a stock that will pay dividends of $2.00 at the end of the first year; $2.20 at the end of the second year; and $2.40 at the end of the third year Also, he believes that at the end of the third year he will be able to sell the stock for $33. What is the present value of all future benefits if a discount rate of 11 percent is applied? (Round all values to two places to the right of the decimal point.) Les Moore retired as president of Goodman Snack Foods Company but is cur- rently on a consulting contract for $35,000 per year for the next 10 years. a. If Mr. Moore's opportunity cost (potential return) is 10 percent, what is the 24. present value of his consulting contract? b. Assuming Mr. Moore will not retire for two more years and will not start to receive his 10 payments until the erd of tbe third year, what would be the value of his deferred annuity? Juan Garza invested $20,000 10 years ago at 12 percent, compounded quarterly. How much has he accumulated? Determine the amount of money in a savings account at the end of 10 years, given an initial deposit of $5,500 and a 12 percent annual interest rate when interest is compounded (a) annually, (b) semiannually, and (c) quarterly. As stated in the chapter, annuity payments are assumed to come at the end of each payment period (termed an ordinary annuity). However, an excep- tion occurs when the annuity payments come at the beginning of each period 25. 26. 27

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