Assignment No[1]. 1 Review

FEDERAL URDU UNIVERSITY ISLAMABAD CAMPUS Assignment N0. 1 : Corporate Finance 1. What are the major areas of concern of Corporate Finance? 2. What is the “Rule of 72”? 3. What would be the expected rate of return if the initial investment is doubled in 8 years? 4. In how many years, an investment would be doubled if a Bank agreed to pay 12% PA? 5. Dividend Growth:- The TICO Corporation currently pays a cash dividend of $5 per share. You believe the dividend will be increased by 4% each year indefinitely. How big the dividend be in eight ears? 6. Deceptive Advertising:- Recently some businesses have been saying things like “Come and try our product. If you do, we’ll give you $100 just for coming by!” If you read the fine print, what you find out is that they will give you a savings certificate that will pay you $100 in 25 years or so. If the going interest rate on such certificate is 10% PA, how much are they really giving you today? 7. You have been offered an investment that will pay you 9% per year. If you invest $15,000, how long until you have $30,000? How long until you have $45,000? 8. After carefully going over your budget, you have determined that you can afford to pay $632 per month towards a new sports car. You can call up your local bank and find out that the going rate is 1% per month for 48 months. How much can you borrow? 9. What annual interest rate will cause $100 to grow to $125.97 in 3 years? 10. Jim Nance has been offered a future payment of $50,000 five years from today. If his opportunity cost is 17% compounded annually, what value would he place on this opportunity?

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Prepared By : Prof. Hassan Din 0300 852 93 78