A company estimates that 1% of their products will fail after the original warranty period but within 2 years of the purchase, with a replacement cost of $500. How much should they charge to have an expected value of $25 on each warranty?
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A company estimates that 1% of their products will fail after the original warranty period but within 2 years of the purchase, with a replacement cost of $500. How much should they charge to have an expected value of $25 on each warranty?
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- A company estimates that 0.1% of their products will fail after the original warranty period but within 2 years of the purchase, with a replacement cost of $150.If they offer a 2 year extended warranty for $14, what is the company's expected value of each warranty sold?An company charges $120 for a warranty. The product has a failure rate of 0.5% and, if the product fails, the company must pay out the full $120. If the company charges $11 per warranty, how much money do they make each time they sell one? Or, out another way, what is their EV?What is the EAC to keep a piece of new equipment operating? The warranty covers repair costs for the first 2 years, but expected repair costs are $1500 per year for the rest of the 7-year life. Normal maintenance is expected to cost $1800 annually. There is an overhaul costing $8500 at the end of year 4. The firm’s interest rate is 8%
- Gale Corporation recently issued 270-day commercial paper with a face value of $100,000 and a simple interest rate of 11 percent. Assuming there are 360 days in a year, what is the commercial paper's annual percentage rate (APR)? The firm incurs no transaction costs to issue the commercial paper.A company has a bank loan outstanding that requires it to make annual payments of $1,000,000 at the end of each of the next three years. The bank has offered to the company to skip the next two payments and instead make a single payment at the end of the loan's term in three years' time. If the interest rate on the loan is 6% p.a., compounded quarterly, the final payment that will make the company indifferent between the two payment options is closest to: a.$2,666,283. b.$2,673,012. c.$3,183,600. d.$3,187,856.Travis International has a debt payment of $2.36 million that it must make 4 years from today. The company does not want to come up with the entire amount at that time, so it plans to make equal monthly deposits into an account starting 1 month from now to fund this liability. If the company can earn a return of 5.43 percent compounded monthly, how much must it deposit each month?
- Mavericks Cosmetics buys $4,691,301 of product (net of discounts) on terms of 7/10, net 60, and it currently pays on the 10th day and takes discounts. Mavericks plans to expand, and this will require additional financing. If Mavericks decides to forego discounts, what would the effective percentage cost of its trade credit be, based on a 365-day year?A company has a bank loan outstanding that requires it to make annual payments of $1,000,000 at the end of each of the next three years. The bank has offered to the company to skip the next two payments and instead make a single payment at the end of the loan's term in three years' time. If the interest rate on the loan is 6% p.a., compounded quarterly, the final payment that will make the company indifferent between the two payment options is closest to: Group of answer choices A $2,666,283. B $2,673,012. C $3,183,600. D $3,187,856.A firm is offered trade credit terms of 3/15, net 45 days. The firm does not take the discount, and it pays after 67 days. What is the nominal annual cost of not taking the discount? (Assume a 365-day year.) Show your completesolution.
- A construction company takes a loan of $1,322,000 to cover the cost of a new grader. If the interest rate is 7.95% APR, and payments are made monthly for five years, what percentage of the outstanding principal does the company pay in interest each month? A. 0.76% B. 6.63% C. 0.61% D. 0.71% E. 0.66%Bulldogs Inc. is given terms of 2/10, net 45 by its suppliers. If Bulldogs Inc. forgoes the cash discount offered and pays the suppliers 5 days after the due date, what is the annual interest rate cost (Use 360-day year)?As a result of a slowdown in operations, Tradewind Stores is offering employees who have been terminated a severance package of $95,000 cash paid today; $95,000 to be paid in one year; and an annuity of $30,000 to be paid each year for 8 years. Required: What is the present value of the package assuming an interest rate of 11 percent? (Future Value of $1, Present Value of $1, Future Value Annuity of $1, Present Value Annuity of $1.)