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Would a manager confronted with given circumstances necessarily make the same decision when pursuing either profit- or wealth-maximising objectives? Explain with an example.
time value and discount rates You just won a lottery that promises to pay you $1,000,000 exactly 10 years from today. Because the $1,000,000 payment is guarnteed by the state in which you live, opportunities exist to sell the claim today for an immediate single cash payment. a. What is the least you will sell your claim for if you can earn the following rates of return on similar-risk investments during the 10-year period? (1) 6% (2) 9% (3) 12% b. Rework part a under the assumption that the $1,000,000 payment will be received in 15 rather than 10 years. c. On the basis of your findings in parts a and b, discuss the effect of both the size of the rate of return and the time until receipt of payment on the present value of a future sum.
Sales will be K100,000 in the first year and are expected to increase by 5% per year.
Costs will be K50,000 and are expected to increase by 7% per year.
Capital investment will be K200,000 and attracts tax allowable depreciation of the full value of the investment over the 5 year length of the project.
The tax rate is 30%.
The business uses a real discount rate of 9%.
Calculate the NPV for the project. (15 marks)
per contract. As part of the contract, ABC was required to deposit $10 per
contract initially in their account with the maintenance margin set at $5 per
contract. If the price per contract falls to $142 overnight, what action will the
exchange require ABC to undertake?
Explain the nature of derivative markets, Derivative instruments that trade in this market and how derivative contracts are created.
