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Author Question: You currently have 67,000 in an interest-earning account. From this account, you wish to make 20 ... (Read 76 times)

imowrer

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on: Jul 10, 2018
You currently have 67,000 in an interest-earning account. From this account, you wish to make 20 year-end payments of 5,000 each. What annual rate of return must you make on this account to meet your objective?
 
  A) 4.16
  B) 5.03
  C) 6.42
  D) 7.32

Question 2

The market value of a leveraged firm is equal to the market value of an unleveraged firm
 
  A) plus the present value of tax shields minus the present value of financial distress costs plus
  the present value of agency costs.
  B) plus the present value of tax shields plus the present value of financial distress costs plus the
  present value of agency costs.
  C) plus the present value of tax shields minus the present value of financial distress costs minus
  the present value of agency costs.
  D) minus the present value of tax shields minus the present value of financial distress costs
  minus the present value of agency costs.
Foundations of Finance ¦ Keown, Petty, Martin ¦ 9th Edition
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underwood14

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Reply #1 on: Jul 10, 2018
Answer to Question 1

Answer: A
Explanation: A) Solving for the rate by the formula method is an iterative (or trial-and-error) process.
MODE = END
INPUT 20 ? -67,000 5,000 0
KEY N I/Y PV PMT FV
CPT 4.16

Answer to Question 2

C


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imowrer

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Reply #2 on: Jul 10, 2018
Thank you


underwood14

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Reply #3 on: Jul 10, 2018
No problemo


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