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Archive for June, 2009

Question: I want to calculate NPV for 5 years .?

Working capital is 5000 in first 4 years and 6000 in the last year ? How to treat this to calculate NPV? Do i put these as costs every year? Guys I also have fixed costs for every year and initial outlay of 100000 .In short i have 100000 initial investment, above mentioned working capital every year and some fixed costs every year…. In the income statement I added back depreciation to net income and got the cash flow ( is the right term for this amount cash flow) …… is there a format ? ( i have revenue , expenses, depreciation, interest, working capital as mentinmed above for 5 years, initial fixed costs of 100000 and fixed costs that incur every year for 5 years whose amount is 5000)….. can some one tell me how to put these together to get NPV

Answer: www.teachmefinance.com

Do your own homework.

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Question: Where do I put certain items onmy balance sheet?

Short Term Investments – Current Assets??
Building and Leasehold Improvements – Non- Current Assets??

Please confirm?

Answer: You are correct.
Short Term Investments – Current Assets
Building and Leasehold Improvements – Non- Current Assets

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Question: Immiediate Help please on this questions?

Assume that an investor is risk-neutral (i.e. assume that the investor always chooses the investment with the higher expected rate of return even if it is riskier). If the yield on 1-year marketable CD’s is 6% while the yield on 2-year marketable CD’s is 7% and this investor purchased the 1 year CD, what must (s)he expect to happen to short term interest rates over the coming year?

In question # 1 above, what is the expected interest rate level one year from now that would equalize the expected rate of return on one year and two year CD’s if both were held for one year?

If the Fed lowers short term interest rates by 1/2% but investors believe this is just a temporary reduction which will only last a few months, and therefore their expectations of future short term interest rates remain unchanged, what will happen to the yield on 10 year Treasury bonds?

Answer: increase
so even an agg 7% is no-no her bond prices will decrese .
fed ques. slight increase, or no impact
would hav been more volatile only if peoples expectations of future rates were lower. long run bnds r vol tho it depends on expec of future sche reselling losses prevent higher prices in this case!

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