Reference no: EM131044820
Mr. Agirich of Aggie Farms is thinking about investing in a center pivot irrigation system to irrigate 100 acres of land. The irrigation system costs $70,000. Mr. Agirich expects that the irrigation system will increase yield and thus operating receipts by $15,000 per year but it will cost $4,000 a year to pay for electricity, maintenance, and additional labor. Mr. Agirich plans on keeping the irrigation system for 4 years before replacing it with a new one and he thinks he can sell it for $50,000 at the end of 4 years. Assume that the Mr. Agirich expects that the inflation rate will be 4% and that operating receipts, operating expenses, and terminal value will increase at the rate of inflation (i.e., operating receipts, operating expenses and terminal value are stated as real dollars, thus, you must convert them to nominal dollars). The bank has offered to lend Mr. Agirich $60,000. The loan will be fully amortized at a 10% interest rate over six years (annual payments). Mr. Agirich anticipates that his marginal tax rate over the next four years will be 20%. The IRS will allow Aggie Farms to depreciate the investment using straight line over 10 years. Mr. Agirich requires at least a 13% pre-tax, risk-free return on capital and a 2% risk premium on projects of comparable risk to the irrigation system.
What is the annual real pre-tax Net Returns in the third year?
A. $12,374
B. $8,899
C. $11,000
D. $9,152
E. None of the above
What is the annual nominal pre-tax Net Returns in the third year?
A. $12,374
B. $8,899
C. $11,000
D. $9,152
E. None of the above
What is the annual real after-tax Net Returns in the third year?
A. $12,374
B. $8,899
C. $11,000
D. $9,152
E. None of the above
What is the nominal tax savings from depreciation?
A. $7,000
B. $6.500
C. $1,400
D. 1,638
E. None of the above
What is the nominal pre-tax terminal value in four years?
A. $55,194
B. $28,000
C. $58,493
D. $42,000
E. None of the above
What is the after-tax terminal value in four years?
A. $55,194
B. $28,000
C. $58,493
D. $42,000
E. None of the above
What is the accumulated depreciation over the four years?
A. $55,194
B. $28,000
C. $58,493
D. $42,000
E. None of the above
What is the after-tax risk adjusted discount rate?
A. 15%
B. 12%
C. 13%
D. 10.4%
E. None of the above
What is the present value of the after-tax net returns?
A. $70,000
B. $29,347
C. $4,252
D. $35,077
E. -$1,323
F. None of the above
|
Write a program to carry out projection pursuit regression
: Find the minimum number of model terms necessary for the model to perform well and compare this to the number of hidden units from the previous exercise.
|
|
Prepare journal entries for news for international business
: Prepare Journal entries about news for international business class. I attached the sample journal. I also attached five news that you will write about.
|
|
What is inclusion and how does legislative mandate of ideia
: What is inclusion and how does the legislative mandate of IDEIA (Individual with Disabilities Education Improvement Act, formerly known as IDEA - Individuals with Disabilities Education Act) support its efforts.
|
|
Looked for a ridiculous product
: For the Module 1 discussion you looked for a ridiculous product. In this second installment of "What were they thinking?!?!" go to YouTube and find the most ridiculous advertisement that you can. Remember that most advertisements you currently see..
|
|
What is the annual real pre-tax net returns in third year
: Mr. Agirich of Aggie Farms is thinking about investing in a center pivot irrigation system to irrigate 100 acres of land. The irrigation system costs $70,000. Mr. Agirich expects that the irrigation system will increase yield and thus operating recei..
|
|
Unemployment labour markets and externalities
: Economics : Unemployment Labour Markets and Externalities. You are an Economist and have been asked by the Gold Coast Council of Queensland to provide advice on the policy options to deal with the increasing use of jet skis on the Broadwater
|
|
Employees a defined benefit pension plan
: XYZ SA, a hypothetical company, offers its employees a defined benefit pension plan. Information on XYZ's retirement plans is presented in Exhibit 2. It also grants stock options to executives. Exhibit 3 contains information on the volatility assu..
|
|
Class intervals for a frequency distribution
: The following class intervals for a frequency distribution were developed to provide information regarding the starting salaries for students graduating from a particular school:
|
|
Show the model can be estimated using only inner products
: Show that the model can be estimated using only the inner products K(xi , xi ‘ ) = h(xi), h(xi ‘)). Hence the kernel property of support vector machines is also shared by regularized linear discriminant analysis.
|