2) a) Suppose that a firm considers an investment in 2021. The cost of that investment which will be paid in 2021 is 50 000 000. The lifetime of that investment is 5 years. The following cashflows are expected from that investment 2022: 10 000 000 2023: 12 000 000 2024: 12 000 000 2025: 10 000 000 2026: 8 000 000 Given this; set out the equation from which MEI (marginal efficiency of investment is derived)
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- A stock you are evaluating is expected to experience supernormal growth in dividends of 12 percent over the next three years. Following this period, dividends are expected to grow at a constant rate of 4 percent. The stock paid a dividend of $1.50 last year and the required rate of return on the stock is 11 percent. Calculate the stock's fair present value. (Do not round intermediate calculations.) Please show all the steps, including the equation(s).The following graph has plots of the net PW of an investment as functions of %-ge changes in the values of the input variables V1, V2, V3, V4 and V5. V1 V2 V3 50% NGƯỜ V5 -30% -20% $200,000 $150,000 $100,000 $50,000 -10% -$50,000 - -$100,000 -$150,000 0% Present Worth B. Decrease of $25,000 C. Increase of 22% D. No change can affect economic feasibility E. Decrease of 22% 10% To which two variables is the present worth most sensitive to? A. V1 and V2 B. V3 and V4 C. V4 and V5 D. V1 and V5 OE. V2 and V3 % change 20% 30% 40% 50% What is the maximum allowable change in V2 before the investment becomes un-economical? OA. Increase of $25,000The demand D (in billions of £) for a bond with coupon rate 5% and face value FV = 1000, andtwo years to maturity as a function of its price P is D = 4000 − 2P. The supply in (billions of£) as a function of the price of the bond is S = 2P + 400. b) Suppose that the yield to maturity of the bond is i = 0.05. What is the quantitydemanded/supplied at this interest rate? What happens to the demand/supply of the bond asthe interest rate increases? Explain why. c) What is the equilibrium interest rate?
- The demand D (in billions of £) for a bond with coupon rate 5% and face value FV = 1000, andtwo years to maturity as a function of its price P is D = 4000 − 2P. The supply in (billions of£) as a function of the price of the bond is S = 2P + 400. b) Suppose that the yield to maturity of the bond is i = 0.05. What is the quantitydemanded/supplied at this interest rate? What happens to the demand/supply of the bond asthe interest rate increases? Explain why. c) What is the equilibrium interest rate? d) Suppose that the bond trades at premium. Is there excess demand or supply? Explain.e) There is a business cycle expansion, so both supply and demand shifts. After the shift, thenew demand curve is given by: D = 4000 + X − 2P, whereas the new supply curve is S =2P + 200. For which values of X will the interest increase/decrease? Which values of X arein line with empirical data?3. Your boss has suggested that, instead of a savings of $37,000 annually, it makes more sense to expect a savings that starts at $20,000 in year 3 and rises $2,000 per year to an ending value in year 13 of $40,000. She bases her suggestion on the fact that the experience curve will gradually reduce production costs. What would be the NPV of the cash flow at 4% if you adopt her suggestion?Hua Xing runs a lawn care service. Buying an additional riding lawn mower will cost $3,000 but would allow her firm to earn $1,000 of additional revenue each year for the next four years. She expects marginal efficiency of capital to be at least 10%. Which statement is an accurate description of this investment opportunity? a) Hua Xing should make the investment because turning $3,000 into $4,000 provides a rate of return of 33%. b) Hua Xing should not make the investment because it has a negative net present value. c) Hua Xing should not make the investment because it provides only a 5.16% return on investment. Od) Hua Xing should make the investment because the internal rate of return exceeds 10%.
- 34. Skyscrapers Corporation is engaged in the manufacturing of standard wide flange section of steel whose selling price is P690. For the average monthly production of wide flange, the cost of production y is approximately related to the number of units produced x by the following equation. y = 0.5x? + 400x + 24,000. What is investment rate corresponding to a volume of production to earn the maximum rate of return of capitalMr. Smith has some money to invest. He selected three stocks and two bond funds as possible investments, shown in the following table. Investment Stock A Stock B Stock C Bond-long term Bond-short term Risk Annual Return High Medium Low 15% 12% 9% 11% 8% One of Mr. Smith's investment requirements is "the total amount invested cannot exceed $500,000". Which option represents this constraint? Note: (X₁, X₂, X₁, X₁, and X, are investment in stock A, stock B, stock C, long term bond and short term bond, respectivelyRefer to the below figure: the saving function can be given as: Aggregate consumption (C) 270 200 130 60 450 100 S = -60 -0.3Y O S = -60+ 0.3Y O S = 60+ 0.7Y O S = -60 -0.7Y O S = -60 +0.7Y 200 300 Aggregate income (Y)
- Matollows and 250 shillings in the following year. After that, dividends are expected to grow at constant 5% per year. If the required rate of return is 10%, what price should investors pay for such shares today? 4. Suppose a firm is considering a project that would require an initial cash outlay of 15 million shillings and expected to generate shs 4.5 million each year for the next 4 years. The firm assumes that the prices and costs increases at the same rate and that the required rate of return expressed in nominal terms is 14%. The firm also practices a policy whereby cash flows are stated at the prices of period zero. The inflation rate is expected to be 5%. (a)Outline two ways in which the effects that inflation has on the acceptability of investment projects could be considered. (b)Using the NPV technique, is the project worth taking? What have you learned from your analysis as far as treating inflation in investment analysis is concerned? 30/2021 4:39:41 PM Page 1 of 2Q) arrow_forward Question Asked Aug 4, 2020 1 views Q) Maria purchases a new big screen television for $850 on her VISA card that carries a favorable interest rate of 8.9% on new charges. a)Determine how long it would take her to pay the television off if she plans on making monthly payments of: $50 $75 and $100 b)compute the total amount that the television cost her with each of the different monthly payments. C) Compute how much money she saved overall by making the $100 payment over the $50 payment. Solve all three subparts plz I upvoteA company produces two products. The revenue made by selling q₁ units of the first product and q2 units of the second product is given by 2 = 91² 1² + 9₂² — 29192 +69₁. r(9₁,92) The current production consists of 10 units of the first product and 12 units of the second product. a) Calculate (10,12) and -(10,12). ər 292 b) The company will increase the production of the first product by 0.5 units and decrease the production of the second product by 1 unit. Do you expect the company to have a higher or a lower revenue? Use your answer to a)! ər 0q1 c) We can approximate the given revenue function by a linear function f (9₁, 92) for values (9₁, 92) which are close to (10,12). Find the equation of this linear function and use this function to estimate the revenue made by producing 0.5 units more of the first product and 1 unit less of the second product. Compare this result with the result you found in b). d) The demand for both products is currently increasing at a rate of 1 unit per…