9.1 Find the following values for a lump sum assuming annual compounding. a. The future value of $500 invested at 8% for one year? b. The future value of $500 invested at 8% for five year?c. The present value of $500 to be received in one year when the opportunity cost rate is 8% ?d. The present value of $500 to be received in five years when the opportunity cost rate is 8% ? With the above details assume the following compounding conditions: a. Semiannual b. Quarterly 9.11 Consider the following investment cash flows: Year Cash Flow 0 $1,000 1 250 2 400 3 500 4 600 5 600 a. What is the return expected on this investment measured in dollar terms if the opportunity cost rate is 10 percent? b. Provide an explanation, in economic terms, of your response c. What is the return on this investment measured in percentage terms? d. Should this investment be made? Explain your answer. 10.6 10.6 Suppose that Apex Health Services has four different projects. These projects are listed below, along with the amount of capital invested and estimated corporate and market betas: Project Amount Invested Corporate Beta Market Beta Walk-in clinic $ 500,000 1.5 1.1 MRI facility 2,000,000 1.2 1.5 Clinical lab. 1,500,000 0.9 0.8 X-ray lab. 1,000,000 0.5 1.0 $5,000,000 a. Why do the corporate and market betas differ for the same project? b. What is the overall corporate beta of Apex Health Services? Is the calculated beta consistent with corporate risk theory? c. What is the overall market beta of Apex Health Services? d. How does the riskiness of Apex’s stock compare with the riskiness of an average stock? e. Would stock investors require a rate of return on Apex that is greater than, less than, or the same as the return on an average-risk stock?
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