and generates annual income of $300,000 for the next 4 years with a salvage value of $200,000. At MARR of 10% determine if this is a good investment. Use MACRS with the depreciation life of 3 years. Effective tax rate is 40%. Use PW. O Not a good investment O Good investment
Q: The quoted rate of a short-term government security is 2%. A premium of 3% is added to the risk-free…
A: As per CAPM formula Required rate of return of the portfolio = Risk free rate+(Beta*Premium)…
Q: Personal financial planning is the process of managing other people's money to achieve economic…
A: As per Bartleby guidelines, If multiple questions are posted, only the first 1 question will be…
Q: Mang Moises needed a refrigerator for his canteen. The refrigerator, which costs P:26,000, may be…
A: In financing, amortization is the amount of loan, in which principal loan paid according to the…
Q: National Co. has established a target capital structure of 30% debt and 70% common equity. The…
A: Last dividend (D0) = P2 Growth rate (g) = 0.02 Current market price (P0) = P25 Marginal cost of…
Q: The real risk-free rate of interest, r*, is 3%. Inflation is expected to be 4% this year, 5 percent…
A: Here, Real Risk Free Rate (r*) is 3% Inflation rate of this year is 4% Inflation Rate of Next Year…
Q: A government bond issued in Italy has a coupon rate of 5 percent, a face value of 100 euros, and…
A: Coupon rate = 0.05 Annual coupon amount (c) = 5 (i.e. 100 * 0.05) Yield to maturity (y) = 0.035…
Q: he covariance between the return on Apple stock and the S&P 500 is 0.12. The variance of the return…
A: Beta of stock is measure the variation of stock movement with overall market movement that can be…
Q: Which of the following statements is true about broker markets? Group of answer choices Brokers…
A: In broker markets, brokers does the trade on behalf of their clients. Brokers do not have right to…
Q: An investment opportunity will pay £100 with a 10% probability, £50 with a 40% probability, or will…
A: Expected value can be calculated as follows = Investment return x Probability There is certain…
Q: Discuss the differences between the three forms of capital market efficiency?
A: Capital market efficiency- It is related to a condition where all the information pertaining to the…
Q: The following data are gathered: · The real risk-free rate is 1.05% · Inflation premium…
A: Risk free rate of the return, which is defined as the theoretical return rate of investment along…
Q: The real risk-free rate of interest, r*, is 3%. Inflation is expected to be 4% this year, 5 percent…
A: Yield on 10 years bond will be the risk free rate,inflation and maturity risk premium.
Q: The future value of $2500 four years from now at 7 percent is
A: Future value for 2500 principal amount plus interest compounded for four years at the interest rate…
Q: You own Php35,000 from the bank for 3 years at 8.50% annual interest, and you will make equal…
A: Loan amount (P) = Php35,000 Monthly loan term (t) = 36 (i.e. 3 years * 12) Monthly interest rate (r)…
Q: Assume that you have been hired as a consultant by CGT, a major producer of chemicals and plastics,…
A: Weighted Average Cost of Capital is computed by using following formula: WACC=WeightEquity×Cost of…
Q: hat the Duration of Assets (DA) is 5 years and the duration of liabilities (DL) is 3 years. The…
A: Duration of security tells us that how much will be change in value of security with change in…
Q: Find Dave’s commission, if he made $7,500 in sales.
A: Commission: It refers to a service charge by the investment advisor or a broker for providing some…
Q: 1) Finance function is limited to supply of funds to the requirements of the organisation. True
A: 1)Financial management includes the Finance Function. The activity of controlling and planning…
Q: What is an "Ethereum Request for Comment"? Who is an "oracle"? What is an oracle problem? What is a…
A: It is normally used as ERC. It is a standard mechanism for issuing tokens on the Ethereum network.
Q: Assume the Black-Scholes framework holds. Consider an option on a stock. You are given the following…
A: Here, Stock Price is 50 Option Price is 3.00 Option Delta is 0.611 Option Gamma is 0.020 Option…
Q: Bookaccino’s Plc wants to acquire Book Cellar Plc. Shares in Bookaccino’s are currently trading at…
A: When one company purchases the majority or all of the shares of another, it gains control of the…
Q: Andie needs to borrow $6,000 to buy a car. One dealer offers her a monthly payment of $193.60 on a…
A: Given two loan options. We have to find the total payments made for both options and select the one…
Q: With reference to IAS 16 (Property, Plant and Equipment), discuss the differences between “the cost…
A: Except when another standard requires or enables other accounting treatments, such as assets…
Q: Question Owing to perennial complaints by students about the lack of accommodation problems on…
A: Before investing in new projects, profitability of the project is evaluated by using various methods…
Q: D3
A: A money market hedge is a method for securing in the value of a country's currency in a…
Q: Part (a): It is said that the Indian who sold Manhattan for $33 was a sharp salesman. If he had put…
A: Time value of money (TVM) refers to the method used to measure the amount of money at different…
Q: Which is the best measure of risk for a single asset held in isolation, and which is the best…
A: Answer - Coefficient of variation shall be regarded as the best measure of risk for a single…
Q: You bought a house with a 30-year mortgage with loan size $500,000 and interest rate 6%. Assuming…
A: First, we need to find out, yearly installment to be made. Solved using Financial Calculator PV =…
Q: What are the pros and cons of including cryptocurrencies such as Bitcoin and Ethereum in investment…
A: Cryptocurrency It is a virtual currency secured by cryptography to work as a medium of exchange,…
Q: Larry wants to make a decision on a six- year amortized loan for him to buy a new car. The value of…
A: The maximum loan that Larry can pay in six years is the present value of monthly payment of $700 for…
Q: You read in The Wall Street Journal that 60-day T-bills are currently yielding 9.5%. Your…
A: As there is no probability of loss in these type of risk free rate thus it is free from any kind of…
Q: You decide to invest P35,000 in RX Pharmaceuticals, P35,000 in TS Banks, and P10,000 in each of the…
A: Expected Return: The expected return is the minimum required rate of return which an investor…
Q: It is likely that airplane tickets will increase 5% in each of the next 5 years. The cost of a plane…
A: Data given: Cost of a plane ticket at the end of the first year = ₱10720. Increase in airplane…
Q: Gs Co. has insufficient retained earnings to fund capital expenditures and decided to issue new…
A: Floatation cost is the cost to be incurred on issue of new shares. Ke = (D1 /(P0 - F)) + G Where…
Q: Find the due date for 130 days note dated July 7,using Actual time
A: Note payable refers to those legal obligations of the company which will be paid on any specific…
Q: Choose the correct answer. 4. Financial goals are classified as to duration as follows, except a.…
A: Financial Industry Regulatory Authority (FINRA) defines the three types of duration for financial…
Q: 13. A discounted loan of $3,000 at a simple discount rate of 6.5% is offered to Mr. Jones. If the…
A: The amount of discount depends on the period and interest rate and amount of the loan taken and cash…
Q: Determine the IRR
A: IRR is the discount rate where NPV of the cashflows calculated using IRR will be Zeera, which means…
Q: Payments of Ordinary Annuities Ryan wants to get together $40 000 to purchase the first house in his…
A: Solution:- When an equal amount is deposited each period at end of period, it is called ordinary…
Q: Compute the book value at the beginning of year 5 of an equipment purchased at P1 350 000 if it has…
A: Depreciation per annum = ( Asset Value - Salvage Value)/Useful life = (1350,000 - 600,000)/10 =…
Q: Find the interest due loan of 5,500 at 3/4% simple interest for 1/4 year, using exact interest
A: To calculate the interest amount we will use exact interest formula as follows: Interest amount =…
Q: $1,000×6%2? square root of 2?Please clarify im confused of your calculation
A: Coupon is the periodic interest paid on a bond. It is the reward to debt holders for investing in…
Q: - D. Conaider E CRA): 207. E CRe) : 30% a port folio of 2 risky assets A & B where =10% 8:20% =0:4…
A:
Q: If you invest a lump-sum amount of P25,000 at an interest rate of 12%, compounded annually, how much…
A: Future Value = Present Value (1 + Interest Rate)Number of years Present Value (PV) = 25,000 Interest…
Q: 1. John approached you with a business proposition to invest in a project. The Annual Cash Flows…
A: Cash flows are the cash generated from the operation of the business organisation. In other words,…
Q: Sensitivity Analysis Methods
A: Sensitivity analysis is an analysis method that is used to identify how many variations in the input…
Q: Suppose that a new government is elected and it changes the law applying to firms to: • Allow…
A: The trade-off theory of capital structure proposes that a corporation balances costs and advantages…
Q: direct-financing lease
A: A lease refers to the contract between two parties in which one party gives another the right to use…
Q: Create a plan of investment on a bank and solve its interest with respect to the rate offered and…
A: Simple interest is computed on the loan's initial main amount, but compound interest is calculated…
Q: GsCo.’s stock sells for P35 that recently paid a P5 dividend. The growth rate will remain the same…
A: Flotation cost is the cost to be incurred on issue of new equity shares, net proceeds from the new…
Mortgages
A mortgage is a formal agreement in which a bank or other financial institution lends cash at interest in return for assuming the title to the debtor's property, on the condition that the obligation is paid in full.
Mortgage
The term "mortgage" is a type of loan that a borrower takes to maintain his house or any form of assets and he agrees to return the amount in a particular period of time to the lender usually in a series of regular equally monthly, quarterly, or half-yearly payments.
Step by step
Solved in 2 steps
- 1.) A project is estimated to cost P100,000, lasts 8 years and have a P10,000 salvage value. The annual gross income is expected to average P24,000, and annual expenses, excluding depreciation will total P6,000. If capital is earning 10% before income tax, determine if this is a desirable investment using A.) Rate of Return Method and B.) Annual Cost or Worth Method. II. Gradients (Shows solutions manually): 2.) The year-end operating and maintenance costs of a certain machine are estimated to be P12,000 the first year and to increase by P2,500 each year during its 4-year life. If capital is worth 12%, determine the equivalent uniform year-end costs. 3.) Annual maintenance costs for an equipment are P1,500 this year and are estimated to increase 10% each year every year. What is the present worth of maintenance cost for six years if i = 12%3. A project requires an initial investment of $1,000,000 and generates annual income of $300,000 for the next 4 years with a salvage value of $200,000. At MARR of 10% determine if this is a good investment. Use MACRS with the depreciation life of 3 years. Effective tax rate is 40%. Use PW. Not a good investment O Good investmentSuppose you are considering an investment project that requires $800.000, has a six-year life, and has a salvage value of $100,000. Sales volume is projected 10 be 65,000 units per year. Price per un it is $63, variable cos! per unit is $42, and fixed costs are $532,000 per year. The depreciation method is a five-year MACRS. 1l1e tax rate is 35% and you ex pect a 20% relurn on this investment. a-Determine the break-even sales volume. b-Calculate the cash flows of the base case over six years and its NPW. c-lf the sales price per unit increases to $400, what is the required break-even volume? d-Suppose the projections given for price, sales volume, variable costs, and fixed costs are all accurate to within ± 15%. What would be the NPW figures of the best-case and worst-case scenarios?
- 3. A project requires an initial investment of $1,000,000 and generates annual income of $300,000 for the next 4 years with a salvage value of $200,000. At MARR of 10% determine if this is a good investment. Use MACRS with the depreciation life of 3 years. Effective tax rate is 40%. Use PW.A PROJECT IS ESTIMATED TO COST P 100,000.00, LASTS 8 YEARS, AND HAVE A P 10,000.00 SALVAGE VALUE. THEANNUAL GROSS INCOME IS EXPECTED TO AVERAGE P 24,000.00 AND ANNUAL EXPENSES, EXCLUDINGDEPRECIATION, WILL TOTAL P 6,000.00. IF CAPITAL IS EARNING 10% BEFORE INCOME TAXES, DETERMINE IFTHIS IS A DESIRABLE INVESTMENT USING:A.) RATE-OF-RETURN METHODB.) ANNUAL COST METHODC.) PRESENT-WORTH COST METHODA company is considering a 3-year project with a projected net income of sh. 4M, 6M,5M in year 1, year 2 and year 3 respectively. The initial investment is sh. 40M and the salvage value is sh.2M.The company applies the straight line method for depreciating its assets, what is the Accounting Rate of Return? Assume a tax rate of 30% Select one: A. 26.3% B. 23.8% C.25% D. None of the above
- Required Investment = $80,000. Project life = 2 years. Salvage value =$30,000. CCA rate = 20% declining balance and 50% rule applies. Annual revenues = $90,000 and annual O&M costs = $20,000. Marginal tax rate = 30%. Assume all the values provided here are in constant dollars, similar to how it's done on slide 38 of Ch.14. Find the net present worth of the project. The MARR' = 10% and inflation rate =6%. The NPW is within $50 of which of the following: 40,042 40,142 40,242 40,342 40,442 None of the above3. An investment of $500,000 generates an annual income of$150,000 over the next4 years with a salvage value of$200,000. At MARR-10% is this a good investment (by computing P.W. factor)?, The effective tax rate is 40% and MACRS depreciation with depreciation life of 3 years is employed. The present worth of this investment is:An asset is planned to be purchased with an initial value of $400,000 and an estimatedsalvage value of $50,000 after 5 years of use. It will be depreciated using the straight-line method.With this asset $500,000 of annual income will be generated and there will beannual costs of $100,000The trem (minimum acceptable rate of return), m = 10% per yearThe annual tax rate is 40%Calculate the present value of this investment and make a recommendation. Please show your work
- 1. For ABC project, book value of the equipment is estimated to be 500,000 at the end of the project's life, and the market value is expected to be 400,000. Clean up costs are 50,000 and change in working capital is 100,000. Calculate net salvage value assuming a 30% tax rate. Paragraph В I !!d. Project D costs $5,000 and will generate sales of $4,000 each year for 5 years. The cash expenditures will be $1,500 per year. The firm uses straight-line depreciation with an estimated salvage value of $500 and has a tax rate of 25%. (1) What is the accounting (book) rate of return based on the original investment? (Round your answer to 2 decimal places.) (2) What is the book rate of return based on the average book value? (Round your answer to 2 decimal places.) Use the built-in NPV function in Excel to calculate the amounts for projects A through D. (Round your answers to the nearest whole dollar amount.) e1. What is the NPV of project A? Assume that the firm requires a minimum after-tax return of 8% on investment. e2. What is the NPV of project B? Assume that the firm requires a minimum after-tax return of 8% on investment. e3. What is the NPV of project C? Assume that the firm requires a minimum after-tax return of 8% on investment. e4. What is the NPV of project D? Assume…Q2. Suppose you are considering the following project with most-likely values: • Project life = 6 years Required investment= $1,000,000 • Salvage value = 80,000 • Depreciation method = 5-year MACRS • Sales volume = 65,000 units annually • Price per unit = $60 • Variable cost per unit - $40 • Fixed annual cost = $532,000 Tax rate = 35% • MARR = 20% (a) Compute the NPW for the most likely case showing all computations. (b) If you were told that the unit price, anmual sales volume, unit variable costs, and fixed costs are all accurate to within +15%, what would be the NPW in the best-case and in the worst case?