An initial investment of $3,500,000 in a business opportunity can generate a net income of $900,000 per year. If i = 0%, the payback period is closest to 3.89 years. Select one: True False 23
Q: CT Corp. is considering two mutually exclusive projects. Both require an initial investment of…
A: Net Present Value, or NPV, refers to the difference between present values of cash inflows and the…
Q: You have been asked to evaluate the profitability of building a new distribution center under the…
A: Net present value refers to the present value of all the future cash flows that are adjusted…
Q: A convertible bond has a par value of $1,000, but its current market price is $950. The current…
A: The par value of bond = $1000 Current market price of bond = $950 The company's stock price = $19…
Q: Ahlia Co specializes in the production of a range of air conditioning appliances for industrial…
A:
Q: Take a Load Off Hotels is considering the construction of a new hotel for $12,000,000. The expected…
A: Given: construction of hotel=$12,000,000 Expected life=6 years Revenues per year=$12,400,000 Total…
Q: Select one
A: Given: The after-tax cost of preferred stock=10% Corporate tax rate=34% Amount invested=$100…
Q: An untreated electric wooden pole that will last 10 years under certain soil condition cost ₱20,000.…
A: When a person invests some money in an asset, the returns are such that the interests over the years…
Q: You invest in a piece of equipment costing $40,000. The equipment will be used for two years, and it…
A: STEP1 Capital cost is found out by: Capital Cost=price-salvage valuei(1+i)n(1+i)n-1+salvage value…
Q: Consider the following two mutually exclusive investment projects that have unequal service lives:…
A: Mutually exclusive investments are a group of potential capital investments in which choosing one…
Q: Your firm has purchased an injection molding machine at a cost of $100,000. The machine's useful…
A: The given information: Annual capital cost is $25,455 Number of operational years is 8 Machine cost…
Q: Project A has a net present value of zero when the discount factor of 20% is used. How much return…
A: The component known as net present value (NPV) is the difference between the present value of cash…
Q: For each of the following factors, state if it will raise or lower the MARR: (a) Higher risk (b)…
A: As per the guidelines, we can answer only first three sub-part questions. If you want answer for…
Q: Fitzgerald Industries has a new project available that requires an initial investment of $5.6…
A: Solution is given below
Q: The privileges of a patent will last for 20 more years and the royalty from it will be ₱ 60,000 at…
A: Time period for roaylty = 20 years Royalty each year = 60000 Interest rate = 8% Capital replacement…
Q: Jill rank-ordered 10 attributes in increasing importance and identified them as A, B, …, J, with a…
A: Table 1 shows the 10 attributes and its scores.
Q: Describe the net future worth of the project?
A: Future value (FV) is the value of an existing asset at a future date, based on an assumed growth…
Q: By outbidding its competitors, Turbo Image Processing (TIP), a defense contractor, has received a…
A: Given: Contract worth=$73,00,000 Payments: 1st year=$43,00,000 2nd year=$30,00,000
Q: A wooden pole- untreated, will last for 10 years under a certain soil condition, costs P1.2M. If a…
A: Return on investment: Return on investment, or ROI, is a term that investors may use to assess the…
Q: Suppose that a new machine tool having a useful life of only one year costs $80,000. Suppose, also,…
A: Given, The cost of purchasing the machine : $80,000 Increase in revenue due to the machine :…
Q: The gaming commission is introducing a new lottery game called Infinite Progresso. The winner of the…
A:
Q: Give Solution A machine is under consideration for investment. The cost of the machine is…
A: *Answer:
Q: You have just won the lottery. The state offers you an amortized payout of $200,000 at the end of…
A: A lump sum is defined as a single large sum of money. In contrast to a series of payments made over…
Q: A proposed project will require the immediate investment of $50,000 and is estimated to have…
A: Using Excel for explanation
Q: Capital asset pricing model (CAPM) For the asset shown in the following table, use the capital asset…
A: Risk free rate; RF = 6% Market return; rm=14% Beta; b= 0.5 According to CAPM (capital assets pricing…
Q: new machine is purchased on the basis of guaranteed performance. However, initial tests indicate…
A:
Q: Assume that the risk-free rate (Rp) is 3% and the market risk premium (km - RF) is 8%. If the value…
A: Given risk free rate = 3 % Market risk premium = 8 % Beta = 0.5
Q: Consider the following two mutually exclusive service projects with projectlives of three years and…
A: Present value is the sum of money to be earned in the potential that is equal in worth to a…
Q: You invest in a piece of equipment costing $30,000. The equipment will be used for two years, at the…
A: Investment in equipment = $30000 Time = 2 years Salvage value = $10000 Operating cost 1st year =…
Q: You are faced with making a decision on a large capital investment proposal. The capital investment…
A: Initial Investment = 640,000 Annual Revenue = 180,000 Expense after 1 year =42000 Expense decreasing…
Q: The estimated beta (/3) of a firm is 1.7. The market return (rm) is 14 %, and the risk-free rate…
A:
Q: Using the one-period valuation model, assuming a year-end dividend of $11.00, an expected sales…
A: Present value: It is the value of the sum of money in the present time.
Q: You have recently learned that the company where you work is being sold for $500,000. The company's…
A: Opportunity cost can be defined as the benefit that has been forgone of the next best alternative…
Q: An investment of 15,000,000 yields net annual revenues of 11,500,000. What is the simple payback…
A: People make investments to generate annual revenues. The net annual revenue is the difference…
Q: A VOM has a selling price of P 400. If its selling price is expected to decline at a rate of 10% per…
A: A product's or service's selling price is the seller's final price, or how much the buyer pays for…
Q: Capital recovery (CR) is the equivalent annual amount that an asset, process, or system must earn…
A: Salvage value is the value that is calculated after depreciation.Capital recovery involves covering…
Q: Applicational Materials sells several pieces of equipment used in the manufacture of silicon-based…
A: Given: F(t) = 1 - e-0.0475t1.2 for all t ≥ 0,where t is in years.
Q: It is proposed to place cable on an existing pole line along the shore of a lake to
A: Equivalent annual cost or EAC is defined as the annual cost of owning, operations and maintenance of…
Q: The company uses a 10% discount rate and the total-cost approach to capital budgeting analysis. The…
A: Capital budgeting entails selecting projects that increase a company's worth. The capital budgeting…
Q: An investor wishes to invest P2,000,000. Venture A, requiring P2,000,000 will return 8%. Venture B,…
A: Given: An investor invest = P2,000,000 The return in Venture A is = 8% An investor B invest =…
Q: Required information Three alternatives are being evaluated based on 7 different attributes, all of…
A: Attributes are the varied factors that are a part of higher cognitive process when chief needs to…
Q: Suntech Sdn Bhd is a company which involved in manufacturing two types of product W and Y. The…
A: One of the key goals of firms in a market is to maximize it's profits. Profit is the difference…
Q: Batelco Inc. is considering two mutually exclusive projects A and B. Each project requires an…
A: 1. Project -A Net Present Value ( N.P.V) for 6 years period PVAF ( 12% , 6 Yrs ) = 4.111% Now,…
Q: capital recovery is the best estimate of an anticipated future market or trade-in value at the end…
A: Given statement is capital recovery is the best estimate of an anticipated future market or trade…
Q: Rent reviews are conducted to ensure that the net income adds value to the commercial real estate…
A: A rent review is a provision in the lease of a commercial property that requires the amount of rent…
Q: Stock ABC has a Forward for December at: $450, Is it reasonable that A PUT option on ABC, with a…
A: A forward contract allows you to buy or sell an asset at a predetermined price in the future. An…
Q: A financial investor has an investment portfolio. A bond in her investment portfolio will mature…
A: Let us understand the returns on reinvestment Option A: There are three possible return depends upon…
Q: Refer to the associated graph. Identify when the WACC approach to project acceptability agrees with…
A: The WACC approach is described as a computation of the cost of capital of a firm in which each type…
Q: An investment of P 8.5 million is expected to yield an annual gross income of P 2.85 million. Annual…
A: A rate of return (RoR) is the net gain or loss of an investment over a specified time period,…
Step by step
Solved in 2 steps
- David is a detective in the Atlanta Police Department earning $75,000 per year. He is also an avid cook and people rave about his cooking. David hears of an opportunity to buy an existing restaurant . He needs to take $100,000 out of his brokerage truck to buy the restaurant. The $100,000 averaged a return of 10% over the last few years. Based on the recent history of the restaurant, he expects annual revenues of $400,000. He expects to spend $140,000 on food, $75,000 on employee expense, $50,000 on rent , and $25,000 for utilities each year. David is trying to decide whether to quit his job as a detective and buy the restaurant. Assuming that David is indifferent between being a detective and owning the restaurant, should David quit his job as a detective and buy the restaurant? Explain why or why not. David’s significant other reminds him that he LOVES being a detective and that he will miss being a detective if he decides to go into the restaurant business. After…An investment of 15,000,000 yields net annual revenues of 11,500,000. What is the simple payback period?You have agreed to make investment in your friends agricultural farm. This would require an amount of $20,000 as initial investment on your part. Your friend promises you revenue (before expenses) of $3600 per year the first year and thereafter the revenue increases by $200 per year. Your share of the estimated annual expenses is $1000. You are planning to invest for six years. Your friend has made the commitment to buyout your share of the business at that time for $24000. You have decided to set a personal MARR of 15% per year. Judge the profitability of the investment project by using Future Worth (FW) method.
- An aircraft hangar requires a new high-efficiency HVAC system for environmental control and reducing heating and cooling expenses. The cost of the HVAC system is $5.0 million, and the annual savings are expected to be $400,000. The useful life of the HVAC system is 20 years, and its residual value is zero. a) What is the simple payback period? b) What is the internal rate of return? (Note: You can use the tables in the book or Excel to find the IRR, but in either case show work and/or cut & paste a spreadsheet. If using the tables an approximate answer will be acceptable)Suppose Omni Consumer Products's CFO is evaluating a project with the following cash inflows. She does not know the project's initial cost; however, she does know that the project's regular payback period is 2.5 years. Year Cash Flow Year 1 $350,000 Year 2 $400,000 Year 3 $475,000 Year 4 $475,00 If the project's weighted average cost of capital (WACC) is 9%, what is its NPV? $373,562 $336,206 $317,528 $429,596You have just purchased 200 shares of General Electric stock at $15 per share. You will sell the stock when its market price doubles. If you expect the stock price to increase 12% per year, how long do you expect to wait before selling the stock? (See Figure.)
- Your father paid $10,000 (CF at t = 0) for an investment that promises to pay $850 at the end of each of the next 5 years, then an additional lump sum payment of $12,000 at the end of the 5th year. What is the expected rate of return on this investment?A new wave-soldering machine is expected to save Brisbane Circuit Boards $15,000 per year through reduced labour costs and increased quality. The device will have a life of eight (8) years, and have a salvage value of $20,000. at the end of the 8th year (salvage value means the used machine can be sold in the open market). If the company can generally expect to get 12% return on its capital, how much could it afford to pay for the wave-soldering machineYou are considering two investment options. In option A, you have to invest RM5000 now and RM1000 three years from now, In option B, you have to invest RM2500 now, RM1500 a year from now, and RM1000 three years from now. In both options, you will receive four annual payments of RM2000 each. (You will get the first payment a year from now.) Which of these options would you choose based on (a) the conventional payback criterion, and (b) the present worth criterion, assuming 8% interest? Based on conventional payback period method, choose either (A/B/Both) Format: PW Option A Format : PW Option B Format : Format : Based on PW analysis method, choose Option (A or B)
- When you purchased your car, you took out a five-year annual-payment loan with an interest rate of 6.2% per year. The annual payment on the car is $4,500. You have just made a payment and have now decided to pay off the loan by repaying the outstanding balance. What is the payoff amount for the following scenarios? a. You have owned the car for one year (so there are four years left on the loan)? b. You have owned the car for four years (so there is one year left on the loan)? a. You have owned the car for one year (so there are four years left on the loan)? The payoff if you have owned the car for one year (so there are four years left on the loan) is S (Round to the nearest cent) b. You have owned the car for four years (so there is one year left on the loan)? (Round to the nearest The payoff if you have owned the car for four years (so there is one year left on the loan) is S cent)Suppose that you purchase a tractor for $170,000 and sell it in 10 years for $50,000. What is the annualized cost (capital recovery) if your required return on capital is 12%?An equipment can be purchased for $84,000. Its expected useful life is eight years at which time its market value will be 5% of its purchased cost. The equipment is expected to generate an annual receipts less expenses of $18,000 per year over the eight-year study period. The company's MARR is set at 16%. a. What is the simple payback period? b. Determine if this is a good investment using the Internal Rate of Return(IRR) method. c. Using the External Rate of Return(ERR) method is this investment acceptable?