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Your neighbor is buying a new recreational vehicle (RV). He has the following options to finance the RV:
I. Pays $70,000 today (in time 0)
II. Buy under a "no payments for three years" program by agreeing to pay $80,000 three years from today (in time 3).
III. Make 84 monthly payments over 7 years of $1000 payable at the end of each month.
(a) If the interest rate is 6% annually, calculate the present value of each option.
(b) At what interest rate do Option II and Option III have the same present value?
a venture has 550,000 cash available for the month of June. it needs for disbursements and minimum cash balance of 700,000 for the month of June. Find the excess of total cash for the month of June
Weisbro and Sons purchase their inventory one quarter prior to the quarter of sale. The purchase price is 60 percent of the sales price. The accounts payable period is 60 days. The accounts payable balance at the beginning of quarter one is $27,600. ..
Paradise, Inc., has identified an investment project with the following cash flows. Year Cash Flow 1 $940 2 1,090 3 1,340 4 1,405 Required: (a) If the discount rate is 8 percent, what is the future value of these cash flows in year 4? (b) What is the..
Sigma Company has the following capital structure: 45% debt, 15% preferred stock and 40% common stock. Determine the weighted average costs of capital given the following information. Ignore floatation costs. Assume a tax rate of 35%.
Wocket Enterprises is considering three options in obtaining fasteners which they sell to construction contractors. The quantity of fasteners that they sell every month is 2000 units. The first alternative is to order the fasteners from a Berea compa..
The Fed cuts the Federal Funds rate and the Discount rate and the Prime goes down to 3.5 percent. Al Truistyk owns an exercise center and needs to upgrade his equipment in order to meet his customers’ needs. The equipment costs $275,000 and the lende..
Chandeliers Corp. has no debt but can borrow at 6.4 percent. The firm’s WACC is currently 8.2 percent, and the tax rate is 35 percent. If the firm converts to 35 percent debt, what is the company’s WACC? If the firm converts to 50 percent debt, what ..
North Construction had $850 million of sales last year, and it had $425 million of fixed assets that were used at only 60% of capacity. What is the maximum sales growth rate North could achieve before it had to increase its fixed assets?
Springfield Nuclear Energy Inc. bonds are currently trading at $1,639.76. The bonds have a face value of $1,000, a coupon rate of 10.5% with coupons paid annually, and they mature in 10 years. What is the yield to maturity of the bonds?
Which of the following is not a goal of Managerial Accounting? A. provide information managers need for planning b. provide information managers need for market wide interest c. provide information managers need for control d. provide information man..
The yield to maturity for 15-year bonds is as follows for four different bond rating categories. The bonds of Falter Corporation were rated as Aa1 and issued at par a few weeks ago. The bonds have just received a new rating of Aa3. Determine the new ..
You deposit 5% of your $40,000 annual income in a 401(K) plan at the end of each year. Your employer matches 2% of your earnings. You expect the plan to earn 10% and you are in the 25% tax bracket. What is your annual investment? What is your one yea..
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