Business, 04.07.2020 17:01, waterdrop026
Suppose someone offered you your choice of two equally risky annuities, each paying $10,000 per year for four years. One is a regular (or deferred) annuity, while the other is an annuity due. If you are a rational wealth maximizing investor which annuity would you choose?
a. The annuity due; however, if the payments on both were increased by at least 50 percent to $15,000, the deferred annuity would be preferred.
b. The deferred annuity.
c. Either one if the discount rate is positive, because as the problem is set up, they have the same present value.
d. The annuity due.
e. Without information about the appropriate interest rate, we cannot find the values of the two annuities, hence we cannot tell which is better.
Answers: 3
Business, 22.06.2019 12:50, axelsanchez7710
You are working on a bid to build two city parks a year for the next three years. this project requires the purchase of $249,000 of equipment that will be depreciated using straight-line depreciation to a zero book value over the three-year project life. ignore bonus depreciation. the equipment can be sold at the end of the project for $115,000. you will also need $18.000 in net working capital for the duration of the project. the fixed costs will be $37000 a year and the variable costs will be $148,000 per park. your required rate of return is 14 percent and your tax rate is 21 percent. what is the minimal amount you should bid per park? (round your answer to the nearest $100) (a) $214,300 (b) $214,100 (c) $212,500 (d) $208,200 (e) $208,400
Answers: 3
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