Answer:
$280,971.79
Explanation:
Calculation to determine How much has Nick accumulated in his retirement account
Using Financial calculator
Amount Nick accumulated in his retirement account = FV(rate, nper, pmt, pv, type)
Where,
Monthly deposit = $130
Number of months = 40 * 12
Number of months= 480
Monthly interest rate = 6.3% /12
Let plug in the formula
Amount Nick accumulated in his retirement account = FV (6.3%/12, 480, -130, 0, 0)
Amount Nick accumulated in his retirement account = $280,971.79
Therefore the Amount Nick accumulated in his retirement account is $280,971.79
Coronado Industries constructed a building at a cost of $30150000. Weighted-average accumulated expenditures were $12500000, actual interest was $1230000, and avoidable interest was $604000. If the salvage value is $2390000, and the useful life is 40 years, depreciation expense for the first full year using the straight-line method is
Answer:
$709,100
Explanation:
Cost of the building = $30150000
Average accumulated expenditures = $12500000
Actual interest = $1230000
Avoidable interest = $604000
Salvage value = $2390000
Useful life = 40 years
Depreciation expense for the first full year:
= ((Cost of the building + Avoidable interest) - Salvage value) / Useful life
= [($30150000 + $604000) - $2390000] / 40
= [$30754000 - $2390000] / 40
= $28364000 / 40
= $709,100
So, the depreciation expense for the first full year using the straight-line method is $709,100.
Drew Davis goes to his local bank to get help developing a financial plan and making investment decisions. Which of the more recent services banks offer is Drew taking advantage of
Answer: b. Getting financial advice
Explanation:
As the number of banks in the world increases, banks are having to offer more products and services apart from their traditional roles as lenders in order to remain relevant and competitive. One such product is giving financial advice.
Banks now offer advice on how to make better investment decisions, develop financial plans and even organize your estate. This is what Drew Davis was taking advantage of here.
Recology CleanScapes, formed when CleanScapes of Seattle merged with San Francisco–based Recology, provides recycling services to about 800,000 residential and commercial customers in four western states. The employee-owned company’s motto is "WASTE ZERO," and it is an industry leader in the waste reduction and recovery industry. Recology CleanScapes has credited much of its financial success, low employee turnover, and high customer satisfaction to open-book management.
Recycling is a worldwide industry. If Recology CleanScapes decided to expand by acquiring companies in other countries, which of the following issues should managers take into consideration when deciding where and how to operate? Check all that apply.
A- In some countries, like China and India, it is not customary to publicly disclose company financial information.
B- In countries with high power distance, where inequality between managers and employees is expected, companies may have difficulty using open-book management.
C- Employees in some countries are not sufficiently well educated to understand company financial information.
Answer:
A- In some countries, like China and India, it is not customary to publicly disclose company financial information. B- In countries with high power distance, where inequality between managers and employees is expected, companies may have difficulty using open-book management.Explanation:
Using open book management would mean disclosing financial information to ensure that employees know how best to use that information to push the company forward. If this is looked down upon in a country like in China and India, Recology would not be able to properly implement its open-book management style so it should take that into consideration.
This is the same problem as countries with high power distance. Inequality is expected and even encouraged between managers and employees yet Recology practices open-book management which actually tries to reduce this equality so Recology needs to properly consider such countries before they move in.
The managers must take into consideration when deciding where and how to operate is that;
In countries with high power distance, where inequality between managers and employees is expected, companies may have difficulty using open-book management.
When there is high power distances, lower-ranking citizens and employees is prone to accept and expect that power will not be distributed equally, and this also makes politicians and business leaders are distanced or isolated from others.
In business, managers need consider the following; information, time, personnel, equipment, and supplies and and also note any limiting factors.
Managers should boast the morale of employees so as to focus on their individual job performance and reward them for individual result.
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What is the impact on cash flow from operations in the current year based on the change in operating assets and liabilities listed below
2 Balance sheets
Prior Year Current Year
4
5 Accounts receivable 1,725 1,825
6 Inventories 1,535 1,785
7 Accounts payable 1,325 1,475
a. -200
b. 0
c. -150
d. 200
Answer:
The impact on cash flow from operations in the current year based on the changes in operating assets and liabilities is:
a. -200
Explanation:
a) Data and Calculations:
Prior Year Current Year Changes
Accounts receivable 1,725 1,825 $100
Inventories 1,535 1,785 $250
Accounts payable 1,325 1,475 $150
b) Accounts receivable increased by $100, thereby reducing cash inflows. Inventories increased by $250, thereby reducing cash inflows. Accounts payable increased by $150, thereby increasing cash inflows. The net effect or impact is a reduction of $200 in the cash from operations.
Ramanond Technologies is an independent business that facilitates foreign exchange trades. In the context of institutions that make foreign exchange happen, Ramanond Technologies is categorized under:
Answer:
Fiscal investors.
Explanation:
Trade can be defined as a process which typically involves the buying and selling of goods and services between a producer and the customers (consumers) at a specific period of time.
Basically, trade can be categorized into two (2) main groups and these are;
I. Import: this involves bringing in goods from a foreign country to sell in a different (domestic) country.
II. Export: it involves the sales of goods produced in a domestic country to a foreign country.
Globalization can be defined as the strategic process which involves the integration of various markets across the world to form a large global marketplace. Basically, globalization makes it possible for various organizations to produce goods and services that is used by consumers across the world.
Under globalization, a fiscal investor refers to an independent business that facilitates or enhances foreign exchange trades between two or more countries.
This ultimately implies that, fiscal investors are institutions or business firms that make it possible for foreign exchange to take place with respect to the buying and selling of goods and services between countries.
Aaron and Michele, equal shareholders in Cavalier Corporation, receive $25,000 each in distributions on December 31 of the current year. During the current year, Cavalier sold an appreciated asset for $60,000 (basis of $15,000). Payment for the sale of the asset will be made as follows: 50% next year and 50% in the following year with interest payable at a rate of 6 percent. Before considering the effect of the asset sale, Cavalier's current-year E & P is $40,000 and it has no accumulated E & P.
Required:
How much of Aaron’s distribution will be taxed as a dividend?
Answer:
Cavalier Corporation
Aaron’s distribution that will be taxed as a dividend is:
= $25,000
Explanation:
a) Data and Calculations:
Amount received in distributions by Aaron and Michele each = $25,000
Proceeds from the sale of an appreciated asset = $60,000
Proceeds to be received 50% in the next year = $30,000
Proceeds to be received 50% in the second year = $30,000
Basis of asset = $15,000
Capital gains = $45,000 ($60,000 - $15,000)
Cavalier's current-year E & P = $40,000
Accumulated E & P = $0
The domestic demand (QD) for wheat in the United States is estimated to be
QDD = 1430 - 55P
where the quantity of wheat is measured in millions of bushels per year. Suppose China also demands U.S. wheat (QDC) and that its demand is given by
QDC = 2100 - 100P
What is the total demand for U.S. wheat, assuming the only two sources of demand are domestic and Chinese?
The total demand for U.S. wheat is:____.
A. QD = 3530 - 155P for all P.
B. QD = 1430 - 55P for all P.
C. QD = 3530 - 155P for P < or = to $26 and QD = 2100 - 100P for P > $26.
D. QD = 3530 - 155P for P < or = to $21 and QD = 2100 - 100P for P > $21.
E. QD = 3530 - 155P for P < or = to $21 and QD = 1430 - 55P for P > $21.
Answer:
E. QD = 3530 - 155P for P < or = to $21 and QD = 1430 - 55P for P > $21.
Explanation:
United States domestic demand function is QDD = 1430 - 55P
Demand for wheat in China is QDC = 2100 - 100P.
The total demand function for U.S. wheat will be given by function:
QD = 3530 - 155P
Due to erratic sales of its sole product—a high-capacity battery for laptop computers—PEM, Inc., has been experiencing financial difficulty for some time. The company’s contribution format income statement for the most recent month is given below: Sales (12,800 units × $20 per unit) $ 256,000 Variable expenses 153,600 Contribution margin 102,400 Fixed expenses 114,400 Net operating loss $ (12,000 ) Required: 1. Compute the company’s CM ratio and its break-even point in unit sales and dollar sales. 2. The president believes that a $6,700 increase in the monthly advertising budget, combined with an intensified effort by the sales staff, will result in an $84,000 increase in monthly sales. If the president is right, what will be the increase (decrease) in the company’s monthly net operating income?
Answer:
Results are below.
Explanation:
Giving the following information:
Sales (12,800 units × $20 per unit) $256,000
Variable expenses 153,600 (12)
Contribution margin 102,400
Fixed expenses 114,400 Net operating loss $ (12,000 )
First, we need to calculate the contribution margin ratio and the break-even point in units and dollars:
Contribution margin ratio= unitary CM / Selling price
Contribution margin ratio= total CM / Sales
Contribution margin ratio= 102,400 / 256,000
Contribution margin ratio= 0.4
Break-even point in units= fixed costs/ contribution margin per unit
Break-even point in units= 114,400 / (20 - 12)
Break-even point in units= 14,300
Break-even point (dollars)= fixed costs/ contribution margin ratio
Break-even point (dollars)= 114,400 / 0.4
Break-even point (dollars)= $286,000
Now, we need to calculate the effect on the income of increasing the advertising budget:
Effect on income= increase in contribution margin - increase in fixed costs
Effect on income= 84,000*0.4 - 6,700
Effect on income= $26,900 increase
A revenue account is increased by debits. is decreased by credits. has a normal balance of a debit. is increased by credits.
Answer: is increased by credits
Explanation:
Revenue accounts are increased by credits because they are an equity account and equity accounts increase by credit. This is because the corresponding entry would be an asset such as cash and as the asset has to increase by being debited, revenue must be increased by credit.
Other accounts that are increased by credit include liabilities. Accounts that increase by debits apart from assets include purchases and expenses.
Consider the following information for Evenflow Power Co.,
Debt: 5,500 5.5 percent coupon bonds outstanding, $1,000 par value, 19 years to maturity, selling for 104 percent of par; the bonds make semiannual payments.
Common stock: 137,500 shares outstanding, selling for $56 per share; the beta is 1.08.
Preferred stock: 18,500 shares of 5 percent preferred stock outstanding, currently selling for $106 per share.
Market: 7.5 percent market risk premium and 4 percent risk-free rate.
Assume the company's tax rate is 31 percent.
Required:Find the WACC.
Answer:
8.02 %
Explanation:
Weighted Average Cost of Capital (WACC) is the the cost required by holders of permanent source of capital pooled together.
WACC = Cost of Equity x Weight of Equity + Cost of Preferred Stock x Weight of Preferred Stock + Cost of Debt x Weight of Debt
where,
Cost of Equity (CAPM) = 4 % + 1.08 x 7.5 %
= 12.10 %
Cost of Preferred Stock = 5%
Cost of Debt :
PMT = ($1,000 x 5.5%) ÷ 2 = $27.50
N = 19 x 2 = 38
PV = $1,000 x 104 % = - $1,040
P/YR = 2
FV = $1,000
I/YR = ??
Using a Financial calculator the YTM (which is the cost of debt) is 5.17 %
But,
We use after tax cost of debt.
After tax cost of debt = 5.17 % x (1 - 0.31) = 3.57%
also
Total Market Value = $5,720,000 + $7,700,000 + $1,961,000 = $15,381,000
Weight of Equity = 0.50
Weight of Preferred Stock = 0.13
Weight of Debt = 0.37
therefore,
WACC = 12.10 % x 0.50 + 5% x 0.13 + 3.57% x 0.37
= 8.02 %
The __________ will provide the organization with the assurance that all necessary steps are included in the disaster recovery plan
CompuTop Company sells toy laptop computers for $30 each. If the variable cost for each laptop is $20 and fixed costs total $25,000, how much sales in dollars must it sell to generate a target income of $66,667
Answer:
the sales in dollars sell to generate the target income is $183,334
Explanation:
The computation of the sales in dollars sell to generate the target income is shown below:
= (Fixed cost + target income) ÷ (selling price - variable cost) ÷ selling price
= ($25,000 + $66,667) ÷ ($30 - $20) ÷ $20
= $91,667 ÷ 50%
= $183,334
Hence, the sales in dollars sell to generate the target income is $183,334
Below are amounts (in millions) from three companies' annual reports. Beginning Accounts Receivable Ending Accounts Receivable Net Sales WalCo $ 1,625 $ 2,572 $ 303,427 TarMart 5,216 5,744 48,878 CostGet 439 475 49,963 Required: 1. Calculate the receivables turnover ratio and the average collection period for WalCo, TarMart and CostGet
Answer:
1. Accounts Receivable Turnover
Walco 144.59 Times
Tarmart 8.9 Times
Costget 109.33 Times
Average collection period
Walco 2.52 Days
Tarmart 41.01 Days
Costget 3.34 Days
2. Walco
Explanation:
1. Calculation to determine the receivables turnover ratio and the average collection period for WalCo, TarMart and CostGet
ACCOUNTS RECEIVABLE TURNOVER
Using this formula
Accounts Receivable Turnover=Net Sales/Average Accounts receivable
Walco=$ 303,427/($ 1,625+2,572)/2
Walco=$ 303,427/$2,098.5
Walco =144.59 Times
Tarmart= 48,878/(5,216 + 5744)/2
Tarmart= 48,878/5480
Tarmart= 8.9 Times
Costget= 49,963/(439 + 475)/2
Costget= 49,963/457
Costget= 109.33 Times
Therefore the receivables turnover ratio is :
Walco 144.59 Times
Tarmart 8.9 Times
Costget 109.33 Times
AVERAGE COLLECTION PERIOD
Using this formula
Average collection period=Average Collection Period
365 /Receivables turnover ratio
Let plug in the formula
Walco= 365.00/144.59 Walco=2.52 Days
Tarmart= 365.00/8.9
Tarmart= 41.01 Days
Costget= 365.00/109.33
Costget=3.34 Days
2. Based on the above calculation the company that appears MOST EFFICIENT in collecting cash from sales is WALCO 144.59 Times.
A $1,000 par value bond pays interest of $35 each quarter and will mature in 10 years. If your simple annual required rate of return is 12 percent with quarterly compounding, how much should you be willing to pay for this bond
Answer:
the present value is $1,115.57
Explanation:
the computation of the present value is shown below:
Given that
Future value be $1,000
RATE is 12% ÷ 4 = 3%
NPER is 10 × 4 = 40
PMT is $35
The formula is shown below:
=-PV(RATE,NPER,PMT,FV,TYPE)
= $1,115.57
Hence, the present value is $1,115.57
An analyst prepares the following common-size income statements for Perez Company: 20X1 20X2 20X3 Sales 100% 100% 100% Cost of goods sold 50% 52% 53% Selling and administrative expense 16% 12% 9% Interest income 4% 4% 4% Pretax income 30% 32% 34% Income tax expense 15% 16% 17% Net income 15% 16% 17% Based only on this information, Perez's improving net profit margin is most likely a result of:
Answer:
Perez Company
Based only on this information, Perez's improving net profit margin is most likely a result of:
Decreasing Selling and Administrative Expenses over the years.
Explanation:
a) Data and Calculations:
Perez Company
Common-size Income Statements for three years:
20X1 20X2 20X3
Sales 100% 100% 100%
Cost of goods sold 50% 52% 53%
Selling and administrative expense 16% 12% 9%
Interest income 4% 4% 4%
Pretax income 30% 32% 34%
Income tax expense 15% 16% 17%
Net income 15% 16% 17%
b) A review of the common-size income statement of Perez Company shows that its selling and administrative expenses continued to reduce an average of 300 percentage points year on year. This reduction can be clearly seen in its improved net income, which also continued to improve year on year. However, the improvement was hampered by increasing income tax expense, which witnessed the same increase.
Because of their sharp quality text output and fast printing speeds, ___ printers are often preferred by businesses.
Answer:
Laser printer
Explanation:
Laser printers are quicker than inkjet printers (producing more pages per minute), generate higher-quality output (with some limitations), and are better suited for high-volume production. Laser printers produce significantly finer lines than inkjet printers, making them ideal for text, logos, and corporate information graphics.
You find a zero coupon bond with a par value of $10,000 and 13 years to maturity. If the yield to maturity on this bond is 4.9 percent, what is the dollar price of the bond
Answer:
$18,763.38
Explanation:
Calculation to determine the dollar price of the bond
Using this formula
Value of bond=Par value/(1+YTM/2)^(2*time period)
Let plug in the formula
Value of bond=10,000/(1+0.049/2)^(2*13)
Value of bond=10,000/(1.0245)^26
Value of bond=10,000/1.8763378
Value of bond=$18,763.38(Approx).
Therefore the dollar price of the bond is $18,763.38
The acid-test ratio differs from the current ratio in that: _______
a) The acid-test ratio is a measure of liquidity but the current ratio is not.
b) Liabilities are divided by current assets
c) The acid-test ratio measures profitability and the current ratio does not.
d) Prepaid expensand inventory are excluded from the calculation of the acid-test ratio.
e) The acid-test ratio excludes short-term investments from the calculation.
Answer:
d) Prepaid expensand inventory are excluded from the calculation of the acid-test ratio.
Explanation:
The acid-test can be regarded quick ratio, this ratio makes the comparison between most short-term assets of a company and most short-term liabilities of the company in order to ascertain if there is enough cash for the company to pay immediate liabilities in the company. These immediate liabilities could be short-term debt. There is usually disregards of current assets by acid-test ratio which it's liquidation is difficult example is inventory.
Current ratio can be regarded as ratio that compares current assets of a company and the current liabilities. It can be gotten by finding ratio of current assets of the company and current liabilities. liquidity of a company can be measured using current ratio by potential creditors.
It should be noted that The acid-test ratio differs from the current ratio in that Prepaid expensand inventory are excluded from the calculation of the acid-test ratio.
A company would like to invest in a capital budget project that will be worth $500,000 in 40 years. How much should this company invest today, assuming an average inflation rate of 2% and a 10% annual return
Answer:
Company needs to invest amount = $23000
Explanation:
Below is the calculation of the present value:
Given the future value, FV = $500000
Number of years, n = 40 years
Real interest rate = 10% - 2% = 8%
Present value = ?
Present value = FV (P/F, r, n)
Present value = $500000 (P/F, 8%, 40)
Present value = $500000 (0.046)
Present value = $23000
Company needs to invest amount = $23000
True or False: With a minimum wage of $8.70, unemployment of unskilled workers is lower with the tax credit versus without it.
Answer: True
Explanation:
Generally speaking, a tax credit would bring about a lower unemployment rate for unskilled labor as opposed to a situation where there is no tax credit.
A tax credit would reduce the amount of taxes that a company is to pay which would leave them with more income to reinvest into the business. This reinvestment will lead to the business having a higher production capacity such that it requires more workers so they will hire more workers, both unskilled and skilled thereby reducing the unemployment rate for both.
today, many long-term care policies are treated as tax-qualified contracts. Which of the following is not correct regarding tax-qualified long-term care contracts?
A. Tax-qualified long-term care policies must provide benefits that are limited to long-term care services.
B. These policies can be provided under an employer sponsored cafeteria plan.
C. These policies allow employers to provide this benefit, take a curent income tax deduction and allow the employee to avoid income inclusion.
D. The premiums for these policies may be deductible either above the line or below line.
Answer:
C. These policies allow employers to provide this benefit, take a current income tax deduction and allow the employee to avoid income inclusion.
Explanation:
Tax qualified long term care contracts usually insurance policies which provide benefit to the company and policy amounts can be deducted from the tax. These benefits are limited to the long term care services. The premium amount of these policies is deductible which provide tax benefit.
Kandy Kane Corporation has income before taxes of $400,000 and a loss from discontinued operations pretax of $100,000. If the income tax rate is 25% on all items, the income statement should show income tax expense of
Answer:
The income tax expense = $100000
Explanation:
Below is the given values:
Income before the taxes = $400000
Loss discontinued = $100000
Income tax rate = 25%
In order to calculate the income tax expense, just find the 25% of the income before tax and the resulting answer will be the income tax expense.
The income tax expense = 25% x 400000
The income tax expense = $100000
Portfolio Expected Return An investor puts 32% of their money in Stock 1 with a 10.15% expected return, 27% of their money in Stock 2 with a 10.95% expected return and the rest in Stock 3 with an expected return of 13.55%. What is the portfolio's expected return
Answer:
the expected return of the portfolio is 11.76%
Explanation:
The computation of the expected return of the portfolio is shown below:
= Respective return × Respective weights
= 0.32 × 10.15 + 0.27 × 10.95 + 0.41 × 13.55
= 3.248% + 2.9565% + 5.5555%
= 11.76%
Hence, the expected return of the portfolio is 11.76%
The same should be considered and relevant
John is working on his department's annual plan. Employee performance has been okay and commitment to his department's goals moderate. In the past John
has asked his employees to do their best. This year he is asking each employee to work with him in determining exactly what that employee is going to
accomplish this year. John wants his people to feel the goals are theirs, to invest in their accomplishment. He wants them to believe that they can accomplish
these goals. He thinks he can help this whole process by meeting with each employee quarterly and talking about where the department is and where the
employee is in regards to goal accomplishment. In the past what principle of goal setting did John violate?
O A) Goal commitment
OB) Assigning specific goals
O Setting difficult but acceptable goals
OD) Providing feedback on goal attainment
Answer:B
Explanation:
Following a decrease in price from $1.90 to $1.50, the weekly demand for a magazine increases from 100,000 to 120,000 copies. The price elasticity of demand for magazines in this range is:
Answer:
0,95
inelastic
Explanation:
0.21
Price elasticity of demand measures the responsiveness of quantity demanded to changes in price of the good.
Price elasticity of demand = percentage change in quantity demanded / percentage change in price
Price elasticity of demand = midpoint change in quantity demanded / midpoint change in price
If the absolute value of price elasticity is greater than one, it means demand is elastic. Elastic demand means that quantity demanded is sensitive to price changes.
Demand is inelastic if a small change in price has little or no effect on quantity demanded. The absolute value of elasticity would be less than one
Demand is unit elastic if a small change in price has an equal and proportionate effect on quantity demanded.
Infinitely elastic demand is perfectly elastic demand. Demand falls to zero when price increases
Perfectly inelastic demand is demand where there is no change in the quantity demanded regardless of changes in price.
When a market is in equilibrium, the: multiple choice 1 quantity demanded equals the price. quantity demanded equals the quantity supplied at the market price. quantity demanded equals the quantity supplied and they both equal the price. quantity supplied equals the price. The market for cell phones reaches equilibrium because cell phone sellers have an incentive: multiple choice 2 to decrease quantity and so do cell phone consumers, so the price goes to to equilibrium. for prices to rise and some cell phone consumers will not buy at higher prices, driving the price to equilibrium. to increase quantity and so do cell phone consumers, so the price goes to to equilibrium. for prices to fall and some cell phone consumers only buy at higher prices, driving the price to equilibrium.
ANSWER:
2 Batteries
Explanation:
The minimum that firm needs to do to engage in international business is to: Invest directly in in operations in another country. Export or import products from other countries. Export low-wage manufacturing jobs to companies in other countries. Establish joint ventures or strategic alliances with companies in other countries. Visit a foreign country frequently.
Answer: Export or import products from other countries.
Explanation:
Anything that has to do with the trading in goods and services with an entity from another country constitutes international business.
The minimum that one has to do therefore, to be involved in international business is to simply export to other countries or import from them. This is the cheapest and most widespread method of international business and as a result, represents the bulk of international business.
Perit Industries has $135,000 to invest. The company is trying to decide between two alternative uses of the funds. The alternatives are: Project A Project B Cost of equipment required $ 135,000 $ 0 Working capital investment required $ 0 $ 135,000 Annual cash inflows $ 25,000 $ 63,000 Salvage value of equipment in six years $ 9,800 $ 0 Life of the project 6 years 6 years The working capital needed for project B will be released at the end of six years for investment elsewhere. Perit Industries’ discount rate is 17%. Click here to view Exhibit 12B-1 and Exhibit 12B-2, to determine the appropriate discount factor(s) using tables.
Answer:
1. Net present value of Project A = -41,449.96
2. Net present value of Project B = $143,746.85
3. I would recommend that company accept Project B.
Explanation:
Note: This question is not complete as the requirement are omitted. The requirements are therefore provided to complete the question before answering it as follows:
Perit Industries has $135,000 to invest. The company is trying to decide between two alternative uses of the funds. The alternatives are:
Project A Project B
Cost of equipment required $ 135,000 $ 0
Working capital investment required $ 0 $ 135,000
Annual cash inflows $ 25,000 $ 63,000
Salvage value of equipment in six years $ 9,800 $ 0
Life of the project 6 years 6 years
The working capital needed for project B will be released at the end of six years for investment elsewhere. Perit Industries’ discount rate is 17%.
Required:
1. Compute the net present value of Project A. (Enter negative values with a minus sign. Round your final answer to the nearest whole dollar amount.)
2. Compute the net present value of Project B. (Enter negative values with a minus sign. Round your final answer to the nearest whole dollar amount.)
3. Which investment alternative (if either) would you recommend that the company accept?
The explanation of the answers is now provided as follows:
1. Compute the net present value of Project A. (Enter negative values with a minus sign. Round your final answer to the nearest whole dollar amount.)
Cost of equipment required = $135,000
Using the formula for calculating the present value of an ordinary annuity, the present value (PV) of the annual cash inflows can be calculated as follows:
PV of annual cash inflow = Annual cash inflow * (1 - (1 / (1 + discount rate))^Project life) / discount rate) = $25,000 * ((1 - (1 / (1 + 0.17))^6) / 0.17) = $89,729.62
The present value (PV) of the salvage value can be calculated as follows:
PV of salvage value = Salvage value / (1 + + discount rate)^Project life = $9,800 / (1 + 0.17)^6 = $3,820.42
Net present value of Project A = PV of annual cash inflow + PV of salvage value - Cost of equipment required = $89,729.62 + $3,820.42 - $135,000 = -41,449.96
2. Compute the net present value of Project B. (Enter negative values with a minus sign. Round your final answer to the nearest whole dollar amount.)
Working capital investment required = $135,000
Using the formula for calculating the present value of an ordinary annuity, the present value (PV) of the annual cash inflows can be calculated as follows:
PV of annual cash inflow = Annual cash inflow * (1 - (1 / (1 + discount rate))^Project life) / discount rate) = $63,000 * ((1 - (1 / (1 + 0.17))^6) / 0.17) = $226,118.64
The present value (PV) of the Working capital investment required can be calculated as follows:
PV of Working capital investment required = Working capital investment required / (1 + + discount rate)^Project life = $135,000 / (1 + 0.17)^6 = $52,628.21
Net present value of Project B = PV of annual cash inflow + PV of Working capital investment required - Working capital investment required = = $226,118.64 + $52,628.21 - $135,000 = $143,746.85
3. Which investment alternative (if either) would you recommend that the company accept?
From parts 1 and 2 above, we have:
Net present value of Project A = -41,449.96
Net present value of Project B = $143,746.85
Since the Net present value of Project A is negative, it should be rejected.
Since the Net present value of Project B is positive, it should be accepted.
Therefore, I would recommend that company accept Project B.
On January 1, 2020, Ellison Co. issued eight-year bonds with a face value of $5,000,000 and a stated interest rate of 8%, payable semiannually on June 30 and December 31. The bonds were sold to yield 6%. The issue price of the bonds is closest to:
Answer:
"$4,417,800" is the correct solution.
Explanation:
According to the question,
Principal amount,
= $5,000,000
Number of period will be:
= [tex]8\times 2[/tex]
= [tex]16[/tex]
Interest rate yield per period will be:
= [tex]\frac{8 \ percent}{2}[/tex]
= [tex]4[/tex] %
Interest rate started per period will be:
= [tex]\frac{6 \ percent}{2}[/tex]
= [tex]3[/tex] %
Now,
The present value of principal will be:
= [tex]Principal\ amount\times Yield \ discount \ factor[/tex]
= [tex]5,000,000\times 0.534[/tex]
= [tex]2,670,000[/tex] ($)
The present value of interest will be:
= [tex]Interest \ amount\times Yield \ discount \ factor[/tex]
= [tex](5,000,000\times 3 \ percent)\times 11.652[/tex]
= [tex]1,747,800[/tex] ($)
hence,
The issue price of bonds will be:
= [tex]2,670,000+1,747,800[/tex]
= [tex]4,417,800[/tex] ($)
Supriya invested $14,320 in a highly rated ETF. At the end of four years, she had $18,434. What was her annual effective yield on this investment
Answer:
6.517%
Explanation:
Present Value PV = $14,320
Future Value FV = $18,434
Number of period Nper = 4
Annual effective yield = Rate(Nper, Pmt, Pv, -Fv)
Annual effective yield = Rate(4, 0, 14320, -18434)
Annual effective yield = 0.06517
Annual effective yield = 6.517%