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Some lenders charge an up-front fee on a loan, which is subtracted from what the borrower receives. This is typically described as "points" (where one point equals 1% of the loan amount). The federal government requires that this be accounted for in the APR that discloses the loan's cost.
A 5-year auto loan for $18,000 has monthly payments at a 9% nominal annual rate. If the borrower must pay a loan origination fee of 2 points, what is the true effective cost of the loan What would the APR be?
If the car is sold after 2 years and the loan is paid off, what is the effective interest rate and the APR?
Graph the effective interest rate as the time to sell the car and pay off the loan varies from 1 to 5 years.
Your company has spent $350,000 on research to develop a new computer game. The firm is planning to spend $55,000 on a machine to produce the new game. Shipping and installation costs of the machine will be capitalized and depreciated; What will be ..
What is a joint production process? Describe a special decision that commonly arises in the context of a joint production process. Briefly describe the proper approach for making this type of decision.
Laurel’s Lawn Care, Ltd., has a new mower line that can generate revenues of $129,000 per year. Direct production costs are $43,000, and the fixed costs of maintaining the lawn mower factory are $16,500 a year. The factory originally cost $0.86 milli..
Muncy, Inc., is looking to add a new machine at a cost of $4,133,250. The company expects this equipment will lead to cash flows of $820,322, $863,275, $937,250, $1,017,610, $1,212,960, and $1,225,000 over the next six years. If the appropriate disco..
WC Inc. has a $10 million (face value), 10-year bond issue selling for 99 percent of par that pays an annual coupon of 9 percent. What would be WC's before-tax component cost of debt? Please show all work and formulas.
Corporate bonds issued by Johnson Corporation currently yield 12%. Municipal bonds of equal risk currently yield 7%. At what tax rate would an investor be indifferent between these two bonds?
Project grow will result in an increase of 5,000 units per year at a sale price of $ 11. each (assume 0% inflation). The additional sales will generate additional operating expenditures of 9. Per unit plus 3,000 in fixed operating cost. What is the i..
Please indicate what formulas were used to figure these calcuations. Make the following assumption about a person and put calculations in a spreadsheet. Calculate the stream of expenses possible with the assumed income. Develop a spreadsheet with cle..
The finance department of a large corporation has evaluated a possible capital project using the NPV method, the Payback Method, and the IRR method. Assuming the data is correct, which method will most likely provide the most accurate decisions and w..
You buy a bond for $994 that has a coupon rate of 6.1% and a 5-year maturity. A year later, the bond price is $1,184. (Assume a face value of $1,000 and annual coupon payments.) What is the new yield to maturity on the bond?
Your firm is contemplating the purchase of a new $545,000 computer-based order entry system. The system will be depreciated straight-line to zero over its five-year life. It will be worth $53,000 at the end of that time. You will save $295,000 before..
A company is considering buying a new machine that will expand the company’s product lineup. The machine costs $1.1 million and will generate cash flows of $300,000 per year for next five years. Assume that the cost of capital is 10%. Find the net pr..
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