Using the AS-AD and IS-LM models, show the effects of an increase in consumer confidence on the position of the AD, AS, IS, and LM curves in the short run and in the medium run. Precisely label all axes and curves to receive full credit. Label the short-run equilibrium and medium-run equilibrium with SR and MR, respectively.
Answers
Answer: hello your question has some missing information below is the missing information
Suppose the economy begins with output equal to its natural level. Then there is an increase in consumer confidence and households attempt to consume more for a given level of disposable income.
answer :
Attached below
Explanation:
IS-LM modeling curves intersects and it also defines the value of r and Y where r ( rate of interest ) Y( output level )
The AS-AD modeling is in equilibrium where aggregate demand curve and short run and long run aggregate supply curves intersects each other defining P and Y
p ( price level ) , Y ( output level )
Note : Increase in aggregate demand shifts IS outward , raises interest rate and output level
Related Questions
The endpoint method computes the percent change as a percent of the starting value.
a. True
b. False
Answers
Answer: True
Explanation:
Endpoint elasticity measures the price change and demand during the endpoint of the change. It uses a simple formula for the calculation of the price and the demand relationships. The formula is:
= (D2 - D1)/D1 ÷ (P2 - P1)/P1
where,
D2 = new demand
D1 = initial demand
P2 = new price
P1 = initial price.
The statement that "The endpoint method computes the percent change as a percent of the starting value" is true.
Prepare general journal entries to record the transactions below for Spade Company by using the following accounts: Cash; Accounts Receivable; Office Supplies; Office Equipment:; Accounts Payable; Recording effects of K. Spade, Capital: K. Spade, Withdrawals; Fees Earned; and Rent Expense. Use the letters beside each transactions in T-accounts transaction to identify entries. After recording the transactions, post them to T-accounts, which serves as A the general ledger for this assignment. Determine the ending balance of each T-account.
a. Kacy Spade, owner, invested $100,750 cash in the company
b. The company purchased office supplies for $1,250 cash.
c. The company purchased S10,050 of office equipment on credit.
d. The company received S15,500 cash as fees for services provided to a customer.
e. The company paid $10,050 cash to settle the payable for the office equipment purchased in transaction c
f. The company billed a customer $2,700 as fees for services provided.
g. The company paid $1,225 cash for the monthly rent.
h. The company collected S1,125 cash as partial payment for the account receivable created in transaction f.
i. Kacy Spade withdrew $10.000 cash from the company for personal use.
Answers
Answer:
a. Cash (Dr.) $100,750
Capital (Cr.) $100,750
b. Office Supplies (Dr.) $1,250
Cash (Cr.) $1,250
c. Office equipment (Dr.) $10,050
Accounts Payable (Cr.) $10,050
d. Cash (Dr.) $15,500
Service revenue (Cr.) $15,500
e. Accounts Payable (Dr.) $10,050
Cash (Cr.) $10,050
f. Accounts Receivable (Dr.) $2,700
Service Revenue (Cr.) $2,700
g. Rent Expense (Dr.) $1,225
Cash (Cr.) $1,225
h. Cash (Dr.) $1,125
Accounts Receivable (Cr.) $1,125
i. Capital / Cash (Dr.) $10,000
Drawings (Cr.) $10,000
Explanation:
Trial Balance :
Debits :
Cash $104,850
Accounts Receivable $1,575
Office supplies $1,250
Office equipment $10,050
Rent expense $1,225
Total $118,950
Credits :
Accounts Payable 0
Service Revenue $18,200
Capital $90,750
Drawings $10,000
Total $118,950
evaluate 3|-3| A.-6 B.6 C.9 D.-9
Answers
Answer:
9
Explanation:
3|-3|
|-3| is the absolute value of - 3 which is 3
Hence,
3 * 3 = 9
Bayside Restaurant LLC is a limited liability company. Its sole member is Conrad. For federal income tax purposes, unless the firm indicates otherwise, it will automatically be taxed as:_________ a. a corporation. b. a person. c. a partnership. d. a sole proprietorship.
Answers
Answer:
D)sole proprietorship
Explanation:
From the question we are informed about Bayside Restaurant LLC who is a limited liability company. Its sole member is Conrad. For federal income tax purposes, In this case, unless the firm indicates otherwise, it will automatically be taxed as sole proprietorship.
A limited liability company can be regarded as popular business structure
which gives benefits of a partnership as well as benefits of corporation. It reffered to as is a newer business structure with several benefits to its members. It is been governed by the individual states with recognition in all states. An limited liability company give room for pass-through taxation of a partnership as well with limited liability of a corporation.
A sole proprietorship can be regarded as " sole trader" or "proprietorship". It can be explained as an unincorporated business, whereby there is just one owner that do pays personal income tax on the earned profit from the business. A sole proprietorship is regarded as the easiest type of business that can be to established due to a lack of government regulation.
The adjusted trial balance of Bramble Corp. at December 31, 2019, includes the following accounts:
Common Stock $16,700
Dividends $7,300
Service Revenue $37,900
Salaries and Wages Expense $16,000
Insurance Expense $2,900
Rent Expense $3,400
Supplies Expense $2,500
Depreciation Expense $1,700
Required:
Prepare an income statement for the year.
Answers
Answer:
$11,400
Explanation:
Income Statement
For the year ended December 31, 2019
Particulars Amount
Revenues
Service revenue $37,900
Expense
Salaries & wages expense $16,000
Insurance expense $2,900
Rent expense $3,400
Supplies expense $2,500
Depreciation expense $1,700
Total expenses $26,500
Net income (loss) $11,400
Trust incurred $10,000 of portfolio income. Its corporate trustee paid fiduciary fees of $1,000 therefrom, and also paid $1,000 in premiums for a life insurance policy on Marcia, the grantor of the trust. How much gross income does Marcia include with respect to these trust activities?
A) $800.
B) $1,000.
C) $8,000.
D) $9,000.
E) $10,000.
Answers
Answer:
$1,000
Explanation:
Based on the information given the
GROSS INCOME amount that Marcia will include with respect to these trust activities will be the amount of $1,000 because we were told that the amount of $1,000 was paid in premiums for a LIFE INSURANCE POLICY ON MARCIA who is the GRANTOR OF THE TRUST, although The trust is not categorized as a grantor trust reason been that the TRUSTEE was authourized to pay the life insurance premiums
Bermuda Cruises issues only common stock and coupon bonds. The firm has a debt–equity ratio of .73. The cost of equity is 11.5 percent and the pretax cost of debt is 6.6 percent. What is the capital structure weight of the firm's equity if the firm's tax rate is 39 percent?
Answers
Answer:
0.5780
Explanation:
Calculation to determine the capital structure weight of the firm's equity
Using this formula
Weight of equity = 1 / (1 + D-E)
Let plug in the formula
Weight of equity = 1 / (1 + .73)
Weight of equity = 1 / 1.73
Weight of equity = 0.5780
Therefore the capital structure weight of the firm's equity is 0.5780
Analysts estimate that a bond has a 40 percent probability of being priced at $950 and a 60 percent probability of being priced at $1,050 one year from today. The bond is also callable at any time at $1,010. What is the expected value of this bond in one year?
A) $1,000
B) $980
C) $1,010
D) $995
E) $986
Answers
Answer:
E) $986
Explanation:
The computation of the expected value of the bond in one year is shown below;
= (Probability × Price of bond) + (Probability × Callable price bond)
= (0.4 × $950) + (0.60 × $1,010)
= $986
Hence, the expected value of the bond in one year is $986
Therefore the correct option is E.
Rob consumes two goods, x and y. He has an allowance of $50 per week and is not endowed with either of the goods. If the price of good x increases and his substitution and income effects change demand in opposite directions.
a. good x must be a Giffen good.
b. good x must be an inferior good.
c. WARP is violated.
d. good x must be a normal good.
e. There is not enough information to judge whether good x is a normal or inferior good.
Answers
Answer:
B
Explanation:
Inferior good is a good whose demand decreases when income increases
The substitution effect looks at the change in price of a good relative to other goods. When the price of good x increases, rob should increase consumption of good y and reduce that of good x if it were a normal good
The income effect looks at how a change in price affects real disposable income
On December 31, the trial balance indicates that the supplies account has a balance, prior to the adjusting entry, of $269. A physical count of the supplies inventory shows that $102 of supplies remain. Analyze this adjustment for supplies using T accounts, and then formally enter this adjustment in the general journal.
Answers
Answer:
Balance Sheet
Supplies
Beg. Bal. $269 | Adj. $167
Bal. $102
Income Statement
Supplies Expense
Adj. $167 |
Date Account Title Debit Credit
Dec 31 Supplies Expense $167
Supplies $167
(To record Supplies used)
Indicate how the following transactions affect the accounting equation.
a. The purchase of supplies on account.
b. The purchase of supplies for cash.
c. Payment of cash dividends to stockholders.
d. Revenues received in cash.
e. Sale made on account.
Answers
Answer:
Hopefully I understood the question correctly. Below is the affect on
assets-liabilities= owners equity
Explanation:
A. Increases assets, increases liabilty
b. Increases assets, decreases assets (a wash for assets)
c. Decreases owners equity, decreases assets
d. Increases owners equity, increases assets
e. Increases owners equity, increases assets
On October 29, Lobo Co. began operations by purchasing razors for resale. The razors have a 90-day warranty. When a razor is returned, the company discards it and mails a new one from Merchandise Inventory to the customer. The company's cost per new razor is $15 and its retail selling price is $70. The company expects warranty costs to equal 6% of dollar sales. The following transactions occurred.
2012
Nov.
11 Sold 60 razors for $4,800 cash.
30 Recognized warranty expense related to November sales with an adjusting entry.
Dec.
9 Replaced 12 razors that were returned under the warranty.
16 Sold 180 razors for $14,400 cash.
29 Replaced 24 razors that were returned under the warranty.
31 Recognized warranty expense related to December sales with an adjusting entry.
2013
Jan.
5 Sold 120 razors for $9,600 cash.
17 Replaced 29 razors that were returned under the warranty.
31 Recognized warranty expense related to January sales with an adjusting entry.
Required:
Prepare journal entries to record above transactions and adjustments.
Answers
Answer:
1. Cash (Dr.) $4,800
Sales (Cr.) $4,800
2. Warranty Expense 6% * $4800 (Dr.) $288
Estimated warranty Liability (Cr.) $288
3. Estimated warranty liability $15 * 12 razors (Dr.) $180
Inventory (Cr.) $180
4. Cash (Dr.) $14,400
Sales (Cr.) $14,400
5. Warranty Expense 6% * $14,400 (Dr.) $864
Estimated warranty Liability (Cr.) $864
6. Warranty liability $15 * 24 razors (Dr.) $360
Inventory (Cr.) $360
7. Cash (Dr.) $9,600
Sales (Cr.) $9,600
8. Warranty Expense 6% * $9600 (Dr.) $576
Estimated warranty Liability (Cr.) $576
9. Estimated warranty liability $15 * 29 razors (Dr.) $435
Inventory (Cr.) $435
Explanation:
Lobo Co sells razors to customer. It provides 90 day return warranty. The estimated returns are 6% of sales made. The estimated warranty liability is recognized at the time of sales. The expense for return of razor is recognized as warranty expense as company discards the returned razors which costs it $15 per razor.
Why irish lions rugby playing with Japan?
Answers
Answer:
I expect the answer in the following form
Explanation:
Irish lions play with Japan to get better and learn new things
Which of the following statements is correct concerning venture capitalist?I. Most venture capitalist are short-term investors in a firm.II. Venture capital firms often specialize in different stages. III. Venture capital is relatively inexpensive in today's competitive markets. a. I and II only.b. I, II and III.c. II and III only.d. Il only.e. I only.
Answers
Answer:
e
Explanation:
Venture capital firms are an example of private equity investment. they invest in firms at their beginning stage of development. They are also long term investments
The key idea of the aggregate expenditure model is that in any particular year, the level of GDP is determined mainly by:_________
a) export spending.
b) investment spending.
c) government spending.
d) the level of aggregate expenditure.
Answers
An accurate assessment of a company's cost structure and customer value proposition requires that managers Multiple choice question. examine current accounting data. evaluate the specific value chain activities under their control. understand the value system for the entire industry. separate their activities from those of their distribution channel allies.
Answers
Answer:
understand the value system for the entire industry.
Explanation:
An industry value chain can be defined as a physical representation of all of the activities and processes undertaken by a company or business firm for the manufacturing of goods and services, especially starting with the purchase of raw materials, manufacturing of finished goods and then ending with the delivery of the finished goods (products) to the market and consumers through a supply chain.
Generally, an accurate assessment of a company's cost structure and customer value proposition requires that managers completely understand the value system for the entire industry.
This ultimately implies that, a manager must ensure that the industry value chain comprises of the costs, margins of suppliers, value-creating activities and processes, and forward channel partners (allies).
Since the middle of the 20th century, the international global business system has been shaped by global institutions. Countries have established these institutions to address the global issues that span their borders.
a. True
b. False
Answers
Answer:
a. True
Explanation:
This statement is correct, as global institutions were created with the objective of regulating global business from international treaties, which implemented a set of rules and regulations that must be followed by all organizations in a global market, as a form of protection to organizations, society and the environment, such as legislative and economic changes, crises and possible negative impacts inherent to organizations in a global business system.
New Corp. issues 2,000 shares of $10 par value common stock at $14 per share. When the transaction is recorded, credits are made to Group of answer choices Common Stock $20,000 and Paid-in Capital in Excess of Stated Value $8,000. Common Stock $28,000. Common Stock $20,000 and Paid-in Capital in Excess of Par $8,000. Common Stock $20,000 and Retained Earnings $8,000.
Answers
Answer:
Common Stock $20,000 and Paid-in Capital in Excess of Par $8,000.
Explanation:
The journal entry to record the issuance of the shares is given below:
Cash Dr (2000 shares × $14) $28,000
To Common stock (2000 × $10) $20,000
To Paid in capital in excess of par value (2000 × 4) $8,000
(being the issuance of the shares is recorded)
Here the cash is debited as it increased the assets and rest 2 account is credited as it also increased the equity
PowerTrain Sports Inc. manufactures and sells two styles of All Terrain Vehicles (ATVs), the Mountain Monster and Desert Dragon, from a single manufacturing facility. The manufacturing facility operates at 100% of capacity. The following per-unit information is available for the two products:
Mountain Monster Desert Dragon
Sales price $5,400.00 $5,250.00
Variable cost of goods sold 3,285.00 3,400.00
Manufacturing margin $2,115.00 $1,850.00
Variable selling expenses 1,035.00 905
Contribution margin $1,080.00 $945.00
Fixed expenses 485 310
Income from operations $595.00 $635.00
In addition, the following sales unit volume information for the period is as follows:
Mountain Monster Desert Dragon
Sales unit volume 5,000 4,850
Required:
a. Prepare a contribution margin by product report. Calculate the contribution margin ratio for each.
b. What advice would you give to the management of PowerTrain Sports Inc. regarding the relative profitability of the two products?
Answers
Answer: See explanation
Explanation:
a. The contribution margin ratio for Mountain Monster will be:
Revenue = 5400 × 5000 = 27000000
Variable cost of goods sold = 3285 × 5000 = 16425000
Manufacturing margin = 2115 × 5000 = 10575000
Variable selling expense = 1035 × 5000 = 5175000
Contribution margin = 1080 × 5000 = 5400000
Contribution margin ratio = Contribution margin / Revenue = 5400000/27000000 = 0.2 = 20%
The contribution margin ratio for Desert Dragon will be:
Revenue = 5250 × 4850 = 25462500
Variable cost of goods sold = 3400 × 4850 = 16490000
Manufacturing margin = 1850 × 4850 = 8972500
Variable selling expense = 905 × 4850 = 4389250
Contribution margin = 945 × 4850 = 4583250
Contribution margin ratio = Contribution margin / Revenue = 4583250/25462500 = 0.18 = 18%
b. What advice would you give to the management of PowerTrain Sports Inc. regarding the relative profitability of the two products?
The Mountain Monster line provides the (larger) total contribution margin and the (larger) contribution margin ratio. If the sales mix were shifted more toward the (Mountain Monster) line, the overall profitability of the company would increase.
In one week, Sami can knit 5 sweaters or bake 240 cookies. In one week, Leila can knit 15 sweaters or bake 480 cookies. Which of the following is correct? Question 6 options: a) Leila has an absolute and a comparative advantage in both tasks. b) Leila has an absolute advantage in both tasks and a comparative advantage in knitting sweaters. c) Sami has an absolute advantage in both tasks and a comparative advantage in knitting sweaters. d) Sami has an absolute and a comparative advantage in both tasks. e) Sami has an absolute advantage in both tasks and a comparative advantage in baking cookies.
Answers
Answer:
B
Explanation:
A country has comparative advantage in production if it produces at a lower opportunity cost when compared to other countries.
A company has absolute advantage in the production of a good or service if it produces more quantity of a good when compared to other countries
Leila makes more sweaters and cookies than Sami. She has an absolute advantage
opportuntiy cost
Sami :
Sweaters = 240 / 5 = 48
cookies = 5/240 = 0.02
Due to an error in computing depreciation expense, Prewitt Corporation overstated accumulated depreciation by $11 million as of December 31, 2021. Prewitt has a tax rate of 30%. Prewitt's retained earnings as of December 31, 2021, would be:_________ (Round million answer to 2 decimal places.)
A. overstated by $6 million.B. understated by $14 million.C. understated by $6 million.D. overstated by $14 million.
Answers
Answer:
Understated by 7.7 Million
Explanation:
Calculation to determine Prewitt's retained earnings as of December 31, 2021, would be:
Accumulated depreciation $11,000,000
Less Deferred tax liability ($3,300,000)
(30%*$11,000,000)
Retained earnings $7,700,000 Understated
Therefore Prewitt's retained earnings as of December 31, 2021, would be:Understated by 7.7 Million
Boccardi Inc., has invested in new pasta manufacturing equipment at a cost of $48,000. The equipment has an estimated useful life of eight years. Estimated annual sales and operating expenses related to the pasta equipment follow:
Annual sales $ 88,000
Labor costs (72,000)
Depreciation of equipment (6,000)
Operating income $ 10,000
Income taxes (4,000)
Net income $ 6,000
The estimated payback of the investment in the pasta equipment is:
a. 3.0 years.
b. 4.0 years.
c. 6.0 years.
d. 8.0 years.
Answers
Answer:
b. 4.0 years.
Explanation:
The computation of the estimated payback period is given below:
The annual cash inflow is
= Net Income + Depreciation of equipment
= $6000 + $6000
= $12,000
Now The payback period of this investment is
= Investment ÷ Annual cash inflow
= $48,000 ÷ $12,000
= 4 years
hence, the option b is correct and the same should be considered
In a job-order costing system, the use of indirect materials that have been previously purchased is recorded as a credit to: a. work in process inventory. b. manufacturing overhead. c. raw materials inventory. d. finished goods inventory.
Answers
Answer:
c. raw materials inventory.
Explanation:
The journal entry to record the indirect material used in the production is given below:
Manufacturing overhead Dr XXXXX
To Raw material XXXXX
(Being the indirect material used is recorded)
Here the manufacturing overhead is debited as it increased the expense while the raw material is credited as it decreased the assets
Therefore the option c is correct
Classity each of the following items as a final good or an intermediate good, and classifly the expenditure on each final good.
Item 1. A DVD bought by a household.
item 2. New computers bought by PepsiCo
Item 3. New aircraft bought by Southwest Airlines
item 4. Fertilizer bought by a Florida tomato grower.
Item 1 is ________ and Item 2 _________.
Answers
Answer:
Item 1. A DVD bought by a household. - This is a final good, to be used for entertainment purposes, and a consumption expenditure.
item 2. New computers bought by PepsiCo - This is a final good, meant to be used for administrative purposes by PepsiCo. It is an investment expenditure because the new computers are an asset.
Item 3. New aircraft bought by Southwest Airlines - This is a final good, to be used as an asset by the airline in order to transport passengers from one place to another. This is an investment expenditure because the aircraft will be used to produce economic benefits for the company.
item 4. Fertilizer bought by a Florida tomato grower - This is an intermediate good, because it is bought in order to be used in the production process of another good, an agricultural product. This is an investment expenditure, because it is essentially intermediate inventory, a type of asset, and assets are investments.
Taveras Corporation is currently operating at 50% of its available manufacturing capacity. It uses a job-order costing system with a plantwide predetermined overhead rate based on machine-hours. At the beginning of the year, the company made the following estimates: Machine-hours required to support estimated production 235,000 Fixed manufacturing overhead cost $ 3,760,000 Variable manufacturing overhead cost per machine-hour $ 2.00
Required:
1. Compute the plantwide predetermined overhead rate.
2. During the year, Job P90 was started, completed, and sold to the customer for $3,900. The following information was available with respect to this job: Direct materials $ 1,794 Direct labor cost $ 1,287 Machine-hours used 86
Compute the total manufacturing cost assigned to Job P90.
Answers
Answer:
Results are below.
Explanation:
To calculate the predetermined manufacturing overhead rate we need to use the following formula:
Predetermined manufacturing overhead rate= total estimated overhead costs for the period/ total amount of allocation base
Predetermined manufacturing overhead rate= (3,760,000 / 235,000) + 2
Predetermined manufacturing overhead rate= $18 per machine hour
Job P90:
Direct materials $ 1,794
Direct labor cost $ 1,287
Machine-hours used 86
We need to allocate overhead costs:
Allocated MOH= Estimated manufacturing overhead rate* Actual amount of allocation base
Allocated MOH= 18*86= $1,548
Total manufacturing costs= 1,548 + 1,794 + 1,287
Total manufacturing costs= $4,629
Black Diamond Company produces snow skis . Each ski requires 2 pounds of carbon fiber . The company's management predicts that 6,000 skis and 7,000 pounds of carbon fiber will be in inventory on June 30 of the current year and that 160.000 will be sold during the next ( third ) quarter . A set of two skis sells for $ 400 . Management wants to end the third quarter with 4,500 skis and 5,000 pounds of carbon fiber in inventory . Carbon fiber can be purchased for $ 25 per pound Each ski requires 0.5 hours of direct labor at $ 30 per hour . Variable overhead is applied at the rate of $ 18 per direct labor hour . The company budgets fixed overhead of $ 1,792,000 for the quarter . Required : 1. Prepare the third - quarter production budget for skis .
Answers
Answer:
158,500
Explanation:
Preparation of the third - quarter production budget for skis .
BLACK DIAMOND COMPANY Production Budget (in units)Third Quarter
Budgeted ending inventory (skis) 4,500
Add budgeted sale 160,000
Required units of available production 164,500
(4500+160,000)
Deduct beginning inventory (skis) (6,000)
Units to be manufactured 158,500
(164,500-6,000)
Therefore the third - quarter production budget for skis is 158,500
The firm you manage faces the following costs: Quantity Total Cost 0 $4 1 $6 2 $7 3 $10 4 $15 5 $21 What is the average fixed cost of the 2nd unit produced
Answers
Answer:
The average fixed cost of the 2nd unit produced is:
= $2.
Explanation:
a) Data and Calculations:
Quantity Total Cost Fixed Cost Average Fixed Cost
0 $4 $4 $4
1 $6 $4 $4
2 $7 $4 $2
3 $10 $4 $1.3
4 $15 $4 $1
5 $21 $4 $0.8
b) The average fixed cost (AFC) is the total fixed cost divided by the quantity of production within the relevant range. It does not change when there a change in the number of goods and services produced by a company. Average fixed cost can be calculated from the salaries of permanent employees, the mortgage payment on machinery and plant, and rent.
A broker represents a seller and has an office policy of acting as an intermediary. A sponsored sales agent brings in a buyer who wishes to purchase one of the broker's listings. The buyer wishes to remain unrepresented. What is the BEST choice available to the broker in this case
Answers
Answer: The broker should continue to represent the seller and treat the buyer as a customer.
Explanation:
From the information given, we are informed that a broker represents a seller and has an office policy of acting as an intermediary, then a sponsored sales agent brings in a buyer who wishes to purchase one of the broker's listings.
Since the buyer wishes to remain unrepresented, then the broker should continue to represent the seller and treat the buyer as a customer.
Perit Industries has $110,000 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 $110,000 $0
Working capital investment required $0 $110,000
Annual cash inflows $20,000 $68,000
Salvage value of
equipment in six years $8,600 $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 16%.
Required:
1. Compute the net present value of Project A.
2. Compute the net present value of Project B.
3. Which investment alternative (if either) would you recommend that the company accept?
Answers
Answer:
$-32,775.48
$185,710.69
Project B
Explanation:
Net present value is the present value of after-tax cash flows from an investment less the amount invested.
NPV can be calculated using a financial calculator
Only projects with a positive NPV should be accepted. A project with a negative NPV should not be chosen because it isn't profitable.
When choosing between positive NPV projects, choose the project with the highest NPV first because it is the most profitable.
Project A
Cash flow in year 0 = -$110,000
Cash flow in year 1 - 5 = $20,000
Cash flow in year 6 = $20,000 + $8,600 = 28,600
I = 16%
NPV = $-32775.48
Project B
Cash flow in year 0 = -$110,000
Cash flow in year 1 - 5 = $68,000
Cash flow in year 6 = $68,000 + $110,000 = $178,000
I = 16%
NPV = $185,710.69
Project B should be chosen because its NPV is positive
To find the NPV using a financial calculator:
1. Input the cash flow values by pressing the CF button. After inputting the value, press enter and the arrow facing a downward direction.
2. after inputting all the cash flows, press the NPV button, input the value for I, press enter and the arrow facing a downward direction.
3. Press compute
One investor is trying to derive the implied discount rate by comparing an annuity and an annuity due. Assume that the future value of the annuity is $49,081.00, and the future value of the annuity due is $52,169.00. All the other information regarding these two investments are similar, what's the implied discount rate
Answers
Answer:
the implied discount rate is 6.29%
Explanation:
The computation of the implied discount rate is shown below;
= (Future value of an annuity due ÷ future value of annuity) - 1
= ($52,169 ÷ $49,081) - 1
= 6.29%
Hence, the implied discount rate is 6.29%
We simply applied the above formula for the same and the same is relevant