Question 1: What is the present value of $200,000 received at the end of every 6 month for the next 8 years at a discount rate of 7%?
Question 2: Find MNO's Weighted Average Cost of capital given the following information:
Tax Bracket: 30%
Percent of Company financed By Stock: 60%
Percent of Company financed by Bonds: 25%
Percent of Company financed by Preferred Stocks: 15%
Stock Required Rate of Return: 15%
Bond Yield: 7%
Preferred Stock Yield: 11%
Question 3: You are making a decision for a part of your company's pension plan. You have a choice of buying an annuity for $800,000 that will pay $100,000 at the end of each year for the next 10 years. You also have other investment opportunities that will yield 8% over the next 10 years. Therefore, you will use 8% as your discount rate when making your decision. Which option will you choose and why? (Make sure you show your math)