1. If the interest rate is 8% per year, what decision would you make based on the decision tree diagram in Figure below. (0.6) Introduce New Product $200,000 profit per year for six years, starting at ΕΟΥ3 -$1,000,000 at ΕΟΥ2 (0.4) $280,000 profit per year for six years, starting at EOY 3 $0 profit/yr. for 8 years Do Nothing

1. If the interest rate is 8% per year, what decision would you make based on the decision tree diagram in Figure below. (0.6) Introduce New Product $200,000 profit per year for six years, starting at ΕΟΥ3 -$1,000,000 at ΕΟΥ2 (0.4) $280,000 profit per year for six years, starting at EOY 3 $0 profit/yr. for 8 years Do Nothing

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter11: Capital Budgeting Decisions

Section: Chapter Questions

Problem 9EB: If you invest $15,000 today, how much will you have in (for further instructions on future value in...

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If you invest $15,000 today, how much will you have in (for further instructions on future value in Excel, see Appendix C): A. 20 years at 22% B. 12 years at 10% C. 5 years at 14% D. 2 years at 7%
If you invest $12,000 today, how much will you have in (for further Instructions on future value in Excel, see Appendix C): A. 10 years at 9% B. 8 years at 12% C. 14 years at l5% D. 19 years at 18%
Jullo Company is considering the purchase of a new bubble packaging machine. If the machine will provide $20,000 annual savings for 10 years and can be sold for $50,000 at the end of the period, what is the present value of the machine investment at a 9% interest rate with savings realized at year end?
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Using Table 1-1 onpage 19, calculate the following:(a) The future value of lump-sum investment of $4,000 in four years thatearns 5 percent.(b) The future value of $1,500 saved each year forthree years that earns 6 percent.(c) A person who invests $1,200 each year finds onechoice that is expected to pay 3 percent per yearand another choice that may pay 4 percent. Whatis the difference in return if the investment is madefor four years?(d) The amount a person would need to deposit todaywith a 5 percent interest rate to have $2,000 inthree years.