A certain manufacturing plant is being sold and was submitted for bidding. Two bids were submitted by interested buyers. The first bid offered to pay 200,000.00 each year for 5 years, each payment being made at the beginning of each year. The second bidder offered to pay 120,000.00 the first year, 180,000.00 the second year and 270,000.00 each year for the next 3 years, all payments being made at the beginning of each year. If money is worth 12 % compounded annually, which bid should the owner of plant accept? ANS. BID 2 MUST BE ACCEPTED; bid 1 = 807,469.87; bid 2 = 859,727.18 %3D

A certain manufacturing plant is being sold and was submitted for bidding. Two bids were submitted by interested buyers. The first bid offered to pay 200,000.00 each year for 5 years, each payment being made at the beginning of each year. The second bidder offered to pay 120,000.00 the first year, 180,000.00 the second year and 270,000.00 each year for the next 3 years, all payments being made at the beginning of each year. If money is worth 12 % compounded annually, which bid should the owner of plant accept? ANS. BID 2 MUST BE ACCEPTED; bid 1 = 807,469.87; bid 2 = 859,727.18 %3D

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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A certain manufacturing plant is being sold and was submitted for bidding. Two bids weresubmitted by interested buyers. The first bid offered to pay P200,00 each year for 5 years,each payment being made at the beginning of each year. The second bidder offered to payP120,000 the first year,P180,000 the second year and P270,000 each year for the next 3years, all payments being made at the beginning of each year. If money is worth 12%compounded annually, which bid should owner of the plant accept?
A certain manufacturing plant is being sold and was submitted for bidding. Two bids were submitted by interested buyers. The first bid offered to pay P 200000 each year for 5 years, each payment being made at the beginneing of each year. The second bid offered to pay P 120000 the first year, P 180000 the 2nd year and P 270000 each year for the next 3 years, all payments being made at the beginning of each year. If money is worth 12% compounded annually, which bid should the owner of the plan accept?
A certain manufacturing plant is being sold and was submitted for bidding. Two bids were submitted by interested buyers. The first bid offered to pay P 200,000 each year for 5 years, each payment being made at the beginning of each year. The second bid offered to pay P 120,000 the first year, P 180,000 the second year, and P 270,000 each year for the next 3 years, all payments being made at the beginning of each year. If money is worth 12% compounded annually, which bid should the owner of the plant accept?
An owner can lease her building for $150,000 per year for three years. The explicit cost of maintaining the building is $50,000, and the implicit cost is $65,000. All revenues are received, and costs borne, at the end of each year. If the interest rate is 6 percent, determine the present value of the stream of: Instructions: Do not round intermediate calculations. Round your final calculation to two decimal places. a. Accounting profits. $ b. Economic profits. $
When Pacific Inc. bid for a project with the government, the company was offered the following two payment options: Option (A): A payment of $655,000 at the end of 3 years, which is the scheduled completion time for the project. Option (B): $225,000 paid upfront at the beginning of the project and the balance payment in 3 years. If the two payments are financially equivalent and the interest rate is 3.30% compounded semi-annually, calculate the balance payment offered in Option(B).
03) In order to replace a present facility, a company is to deposit $11000 at the end of every year at an interest rate of 8 % compounded annually. Find: a. The future total amount that will be available for the company after 10 years to purchase the new facility. b. The total amount (initial+ interest amount) at the end of each year until the last year of deposition.
An owner can lease her building for $160,000 per year for three years. The explicit cost of maintaining the building is $55,000, and the implicit cost is $70,000. All revenues are received, and costs borne, at the end of each year. If the interest rate is 5 percent, determine the present value of the stream of: Instructions: Do not round intermediate calculations. Round your final calculation to two decimal places. a. Accounting profits. $ b. Economic profits. $ Note:- Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism. Answer completely. You will get up vote for sure.
Jack Toronto is the newly recruited financial analyst of Von Mining Company Ltd. He has been asked to analyze a proposal to acquire a drilling machine. He received the appropriation capital request. Von Mining Company can purchase the drilling machine for GH¢ 50,000. Von Mining Company Ltd can also lease the drilling machine for GH¢12,200 a year for a 5-year period from Trosky Leasing Ltd. The expected life of the machine is given as 5 years and expected to have a salvage value of GH¢5000 in 5 years’ time. The mining company intends to buy the drilling machine a fair market value at that time. If the mining company decides to buy the machine, it can acquire financing at 20%. It will cost the Mining Company GH¢6,000 in maintenance and insurance of the drilling machine. The tax rate is 34%. Assume depreciation is on straight line basis and lease rentals are tax deductible. (Assume payment is made at the end of the year) Required: a). Calculate NPV to Von Mining Company Ltd of the…
Jack Toronto is the newly recruited financial analyst of Von Mining Company Ltd. He has been asked to analyze a proposal to acquire a drilling machine. He received the appropriation capital request. Von Mining Company can purchase the drilling machine for GH¢ 50,000. Von Mining Company Ltd can also lease the drilling machine for GH¢12,200 a year for a 5-year period from Trosky Leasing Ltd. The expected life of the machine is given as 5 years and expected to have a salvage value of GH¢5000 in 5 years’ time. The mining company intends to buy the drilling machine a fair market value at that time. If the mining company decides to buy the machine, it can acquire financing at 20%. It will cost the Mining Company GH¢6,000 in maintenance and insurance of the drilling machine. The tax rate is 34%. Assume depreciation is on straight line basis and lease rentals are tax deductible. (Assume payment is made at the end of the year) Required: a). Calculate NPV to Von Mining Company Ltd of the lease…
The Olsen Company has decided to acquire a new truck. One alternative is to lease the truck on a four-year contract for a lease payment of $10,000 per year, with payments to be made at the beginning of each year. The lease would include maintenance. Alternatively, Olsen could purchase the truck outright for $40,000, financing with a bank loan for the net purchase price, amortised over a four-year period at an interest rate of 10 percent per year, payments to be made at the end of each year. Under the borrow-to-purchase arrangement, Olsen would have to maintain the truck at a cost of $1,000 per year, payable at year-end. The truck falls into the MACRS 3-year class. It has a salvage value of $10,000, which is the expected market value after four years, at which time Olsen plans to replace the truck irrespective of whether it leases or buys. Olsen has a marginal tax rate of 40 percent. Should the truck be leased or purchased? Provide your decision based on NPV analysis.
Additional Activities Decide on the following problems by determining the fair market value. Show your solutions in a sheet of paper together with your decision on the problem. 1. Investment in Sunrise Company is P 100,000 at the end of 5 years plus P 24,000 annually for 4 years afterwards. Investment in XYZ company offers P 50,000 semi-annually P 15,000 every 6 months after 6 years. Assume that the money is worth 9% compounded annually, which investment is preferable? 2. A motorcycle is for sale P 60,500 cash or on installment terms P 3,000 per month for 2 years at 12% compounded annually. If you were the buyer, what would you prefer, cash or installment?
I request to you d,nt use excel to solve.only typed answer gives. Q)A construction company has an option to purchase a certain machine for $60,000 at any time between Now and 6 years from now. If the company plans to purchase the machine 6 years from now , the equivalent present amount that the company is paying for the machine at 10 % per year interest is closest to

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