Required rate of return calculator
[DOC File]RETURN CALCULATIONS
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The minimum expected rate of return that investors require before they would invest in a given security taking into consideration the investment's underlying risk. The Required Rate of Return for security j equals the Nominal Risk-Free Return plus the Risk Premium given the Risk(s) of …
[DOCX File]Cost benefit analysis guidance note
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By applying a discount rate to future cash flows, the required rate of return is explicitly taken into account in the net present value calculation. Either approach demonstrates that the need to discount future cash flows can be viewed in terms of the opportunity cost of the cash flows, whether this is the cost of delaying consumption or the ...
[DOC File]Quantitative Problem Chapter 3
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If your required rate of return does not change, how much would you be willing to pay if this were a 20-year, annual payment, ordinary annuity instead of a perpetuity? Solution: To find your yield to maturity, Perpetuity value ( PMT/I. So, 15625 ( 1250/I. I ( 0.08. The answer to the final part, using a financial calculator:
[DOC File]Chapter 7
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b. Yes. At a price of $829, the yield to maturity, 15 percent, is greater than your required rate of return of 12 percent. If your required rate of return were 12 percent, you should be willing to buy the bond at any price below $908.88. 7-7 The rate of return is approximately 15.03 percent, found with a calculator using the following inputs:
[DOC File]Exam-type questions
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1. Stock A has a required return of 10 percent. Its dividend is expected to grow at a constant rate of 7 percent per year. Stock B has a required return of 12 percent. Its dividend is expected to grow at a constant rate of 9 percent per year. Stock A has a price of $25 per share, while Stock B …
[DOC File]Ch - Iowa State University
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What is the required rate of return? Fee Founders has perpetual preferred stock outstanding that sells for $60 per share and pays a dividend of $5 at the end of each year. Project K costs $52,125, and its expected net cash inflows are $12,000 per year for 8 years, and its WACC is 12 percent.
[DOC File]Chapter 10
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4. Find (a) the PV of the expected cash flows and/or (b) the asset’s rate of return. 5. If the PV of the inflows is greater than the PV of the outflows (the NPV is positive), or if the calculated rate of return (the IRR) is higher than the project cost of capital, accept the project. B.
[DOC File]Chapter 10
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This return was in line with the required returns by bondholders at that point as described below: Real rate of return 3%. Inflation premium 5. Risk premium 4. Total return 12%. Assume that five years later the inflation premium is only 3 percent and is appropriately reflected in the required return (or yield to maturity) of the bonds.
[DOC File]ACCTG 505 – CHAPTER 21
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If Erudite’s required rate of return is 12% on projects of this type and level of risk, what is the net present value of this proposed investment? 1. Determine the total present value of the cash inflows, using either your calculator (preferred) or tables (requires two computations). 2. Determine the present value of …
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