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Lara Fredericks is interested in two mutually exclusive investments. Both investments cover the same time horizon of 6 years. The cost of the first investment is $10,000; Lara expects equal and consecutive year-end payments of $3,000. The second investment promises equal and consecutive year-end payments of $3,800 with an initial outlay of $12,000 required. The current required return on the first investment is 10%, and the second investment has a required return of 12% a What is the net present value of the first investment? b What is the net present value of the second investment? c Being mutually exclusive, which investment should Lara choose? Explain. d Which investment was relatively more risky? Explain.
Short term financial planning for the pdc company was described earlier in this chapter. refer to the pdc company projected monthly operating schedule.
Lang Industrial Systems Company (LISC) is trying to decide between two different conveyor belt systems. System A costs $232,000, has a four-year life, and requires $73,000 in pretax annual operating costs. Calculate the EAC for both conveyor belt sys..
The Completely Natural Gardening Center is considering installing a new overhead sprinkling system. The expected net increase in annual operating cash flows is $40,000 and the expected net increase in annual depreciation charges is $8,000. If Complet..
Suppose the average return on an asset is 11.5 percent and the standard deviation is 20 percent. Further assume that the returns are normally distributed. Use the NORMDIST function in Excel to determine the probability that in any given year you will..
You have been offered a job with an unusual bonus structure. As long as you stay with the firm, you will get extra 70, 000 every seven years, starting seven years from now. What is the present value of this incentive if you plan to work for the compa..
ABC had assets of $15 million last year; sales were $18 million; liabilities plus accruals that increased spontaneously with sales was 8% of assets; net income was $275,000 of which $120,000 was paid out in the form of dividends. Assuming that sales ..
What is the primary benefit of the MACRS depreciation system over straight line
What annual rate of return is earned on a $2000 investment made in year 3 when it grows to $3000 by the end of year six? What's the current yield of a 4.5% coupon corporate bond quoted at a price of 102.08?
An individual has $110,000 in a retirement account. At the beginning of each year she withdraws $10,000 while earning 10% a year on her money. How much money will be in the account in 20 years? How much will she have in the account after 40 years?
A general partnership must have at least 2 members with each having their potential financial loss in the partnership limited to their individual investment. The owner of a sole proprietorship has unlimited liability for the company’s debt. A corpora..
Show that the borrower’s periodic outlay for a standard sinking fund method repayment at rate j is larger than the level outlay under amortization method with the interest rate i, if i > j
Assume that the simple profit variance is -$200,000, while the flexible profit variance is +$200,000. Which of the following statements about this situation is most correct? When the volume forecast error is accounted for, the business lost money.
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