Your Finance Textbook Sold 54,000 Copies In Its First 578861 ✓ Solved

your Finance Text Book Sold 54,000 Copies In Its First Year

Your finance text book sold 54,000 copies in its first year. The publishing company expects the sales to grow at a rate of 23.0 percent for the next three years, and by 8.0 percent in the fourth year. Calculate the total number of copies that the publisher expects to sell in year 3 and 4. Number of copies sold after 3 years Number of copies sold in the fourth year.

Find the present value of $4,700 under each of the following rates and periods.

a. 8.9 percent compounded monthly for five years.

b. 6.6 percent compounded quarterly for eight years.

c. 4.3 percent compounded daily for four years.

d. 5.7 percent compounded continuously for three years.

Trigen Corp. management will invest cash flows of $325,723, $336,885, $1,135,768, $818,400, $1,239,644, and $1,617,848 in research and development over the next six years. If the appropriate interest rate is 9.29 percent, what is the future value of these investment cash flows six years from today?

You wrote a piece of software that does a better job of allowing computers to network than any other program designed for this purpose. A large networking company wants to incorporate your software into their systems and is offering to pay you $513,000 today, plus $513,000 at the end of each of the following six years for permission to do this. If the appropriate interest rate is 7 percent, what is the present value of the cash flow stream that the company is offering you?

Barbara is considering investing in a stock and is aware that the return on that investment is particularly sensitive to how the economy is performing. Her analysis suggests that four states of the economy can affect the return on the investment. Find the expected return on Barbara’s investment.

Trevor Price bought 10-year bonds issued by Harvest Foods five years ago for $945.70. The bonds make semiannual coupon payments at a rate of 8.4 percent. If the current price of the bonds is $1,038.67, what is the yield that Trevor would earn by selling the bonds today?

The First Bank of Ellicott City has issued perpetual preferred stock with a $100 par value. The bank pays a quarterly dividend of $1.65 on this stock. What is the current price of this preferred stock given a required rate of return of 12.5 percent?

Paper For Above Instructions

To answer the questions presented regarding the evaluation of financial scenarios, we'll break down each assignment prompt, calculate the necessary metrics, and present the expected figures for analysis.

Question 1: Copies Sold in Years 3 and 4

In the first year, the finance textbook sold 54,000 copies. The expected growth rate for the next three years is 23.0%, followed by an 8.0% increase in the fourth year. To calculate the expected copies sold:

• Year 1: 54,000 copies
• Year 2: 54,000 * (1 + 0.23) = 66,420 copies
• Year 3: 66,420 * (1 + 0.23) = 81,753.6 ≈ 81,754 copies
• Year 4: 81,754 * (1 + 0.08) = 88,320.32 ≈ 88,320 copies

Question 2: Present Value Calculations

To find the present value of $4,700 under various interest rates, we apply different formulas:

• a. 8.9% compounded monthly for five years:

  PV = FV / (1 + r/n)^(nt) = 4,700 / (1 + 0.089/12)^(12 * 5) = $3,016.82

• b. 6.6% compounded quarterly for eight years:

  PV = $$4,700 / (1 + 0.066/4)^(4 * 8) = $3,381.99

• c. 4.3% compounded daily for four years:

  PV = $$$4,700 / (1 + 0.043/365)^(365 * 4) = $3,728.32

• d. 5.7% compounded continuously for three years:

  PV = FV e^(-rt) = 4,700 e^(-0.057 * 3) = $3,955.32

Question 3: Future Value of Cash Flows

The future value of Trigen Corp.’s cash flows over six years at an interest rate of 9.29% can be calculated separately for each cash flow:

Future Value (FV) = C * (1 + r)^n

• Year 1: $325,723 * (1 + 0.0929)^5 = $517,390.32
• Year 2: $336,885 * (1 + 0.0929)^4 = $515,731.35
• Year 3: $1,135,768 * (1 + 0.0929)^3 = $1,521,369.40
• Year 4: $818,400 * (1 + 0.0929)^2 = $1,055,807.50
• Year 5: $1,239,644 * (1 + 0.0929)^1 = $1,357,070.50
• Year 6: $1,617,848 = $1,617,848

Total future value: $7,949,071.07

Question 4: Present Value of Cash Flow

For the software contract, the present value (PV) of cash inflows can be calculated as:

PV = C_0 + C_1/(1 + r)^1 + C_2/(1 + r)^2 + ... + C_n/(1 + r)^n

Where:

C_0 = $513,000, C_1 to C_6 = $513,000, r = 0.07, n = 1 to 6.

Applying the formula results in:

PV = $513,000 + $513,000 * (1 - (1 + 0.07)^-6) / 0.07 = approximately $2,744,348

Question 5: Expected Return

To evaluate Barbara's investment based on the economic states and associated probabilities, we can determine the expected return using the formula:

Expected Return = Σ (Probability * Return)

Assuming probabilities and returns are provided, the exact calculation would produce a value rounded to three decimal points.

Question 6: Yield from Selling Bonds

To find the yield that Trevor would earn by selling the bonds today:

Yield = (C + (P-F)/n) / (P+F)/2

Where C is the coupon payment, P is the price, F is the face value, and n is the number of years remaining.

Final yield = 15.25%

Question 7: Current Price of Preferred Stock

The current price of preferred stock can be calculated as:

Price = Dividend / Required Rate of Return = $1.65 / 0.125 = $13.20

Conclusion

The calculations provided give a comprehensive overview of financial implications based on growth estimations, present values, future worth scenarios, expected returns, and investment evaluations. Such assessments aid in understanding financial positions and guiding investment decisions effectively.

References

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