Corporate Finance

------------------------------------------------- CORPORATE FINANCE EXERCICES SESSION 1 : 1. wherefore should we natural spring the axe ? We discount to know the deport mensurate of an item. 2. Why does the represent on capitalization show curves and not lines ? Because the actor of capitalization is directly linked with the duration and because you earn by-line on interest earned before. 3. Are initial flows on an investing more(prenominal) oft positive or forbid ? What more or less for final exchange flows ? sign flows atomic number 18 more a best deal negative and final cash flows argon more often positive. 4. What implement pushes market value toward present value ? The mechanism is : Arbitrage 5. A market is in counterweight when present determine are nil and the net present values are positive. True or false ? False, the turnaround is true. NPV = 0 and PV >0. do work 1 : Suppose you ease up a choice mingled with receiving $5,000 now or $10,000 in tail fin years. You believe you croupe earn 10% on the $5,000 today. You neediness to know what the $5,000 impart be worth in finsome years. FVS1 = 5000*1,1^5 = 8052,55 so you have to choice 10k ! Exercise 2 : Suppose you are offered an enthronement that pays $10,000 in five years. If you involve to earn a 10% return, what is the value of this investment today?

10000/(1+10%)^5=6209 Exercise 3 : put one across 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 i nvestment ? 10000+*(1+10%)^5=8053 FV = 805! 3+10000=18053 Exercise 4 : What is the future value in three years of the followers 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 pursual 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 in full essay, order it on our website: OrderEssay.net

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