Corporate Finance

------------------------------------------------- CORPORATE FINANCE EXERCICES SESSION 1 : 1. why should we bounce the axe ? We discount to know the invest mensurate of an item. 2. Why does the represent on capitalization show curves and not lines ? Because the king of capitalization is directly linked with the duration and because you earn involution on interest earned before. 3. Are initial flows on an investing more than oft positive or shun ? What more or less for final exchange flows ? initial flows atomic number 18 more a nifty deal negative and final cash flows argon more often positive. 4. What implement pushes market measure toward present value ? The mechanism is : Arbitrage 5. A market is in residual when present determine are nil and the net present values are positive. True or false ? False, the reverse is true. NPV = 0 and PV >0. do work 1 : Suppose you feature a choice mingled with receiving $5,000 at present or $1 0,000 in quintette years. You believe you croupe earn 10% on the $5,000 today. You compulsion to know what the $5,000 impart be worth in quint years. FVS1 = 5000*1,1^5 = 8052,55 so you have to choice 10k ! Exercise 2 : Suppose you are offered an investiture that pays $10,000 in quin years. If you confront to earn a 10% return, what is the value of this investment today?

10000/(1+10%)^5=6209 Exercise 3 : wear off that an investment give pay you $5,000 now and $10,000 in five years. You are expecting a 10% return. 1. What is the present value of this investment ? 10000/(1+10%)^5=6209 PV=6209+5000=11209 2. What is the future value of this investment ? 10000+* (1+10%)^5=8053 FV = 8053+10000=18053 Exerci! se 4 : What is the future value in three years of the interest cash flows if the combining rate is 5%? 2000*1.05^3 = 2315 2000*1.05^2=2205 2000*1.05=2100 FV = 2315+2205+2100=6620 Exercise 5 : Would you be willing to pay $5,000 for the quest stream of cash flows if the discount rate is 7%? 3000/1.07=2803 2000/1.07^2=1746 1000/1.07^3=816...If you want to get a just essay, order it on our website: OrderEssay.net

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