Answered: An investment costs sh.150,000 and pays…

Business

Finance

An investment costs sh.150,000 and pays sh. 12,000 in perpetuity. If the interest rate is 9 percent, what is the PV?

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter19: Capital Investment

Section: Chapter Questions

Problem 23E: Assume that an investment of 100,000 produces a net cash flow of 60,000 per year for two years. The...

See similar textbooks

Related questions

Q: What is the YTM of this corporate bond - 20-year bond issued 5 years ago, interest rate of 4%, you j...

A: Par value = $1000 Coupon rate = 4% Coupon amount = 1000*0.04 = $40 Current price = $1062.50 Years to...

Q: One of your Taiwanese suppliers has bid on a new line of molded plastic parts that is currently bein...

A: NPV It provides the net present value or worth of an investment. If NPV is calculated considering al...

Q: The Northern Mart’s balance sheet at the close of 2021 appeared as follows. They are a very successf...

A: Weighted average cost of capital is the average cost of capital which is calculated by multiplying t...

Q: The current risk-free rate is 3 percent and the market risk premium is 5 percent. You are trying to ...

A: Fist we need to calculate expected rate of return by using CAPM equation rs =Rf +Beta(Rm-Rf) where r...

Q: What is your expected annual rate of return for this portfolio: stock A 1000 shares at $22/share exp...

A: Given, Stock A has 1000 shares at $22/share Stock B has 750 shares $11.50/share Bond $25000 Money ma...

Q: b. A farmer is considering replacing a labor-intensive machine system with a more capital- intensive...

A: The initial investment and incremental cash flows: The initial investment in a project involves all ...

Q: ery month. What is the APR?

A: APR is annual percentage rate of credit card which is charged based on monthly basis interest rate.

Q: Galvanized Products is considering purchasing a new computer system for their enterprise data manage...

A: 1. Computation of loan amount. Amount of loan = 100000 × 25% = 25000 Loan including interest = 25000...

Q: 4800 accumulating to 5994.78 compounded monthly for 4 years. what is the interest rate?

A: We need to use compound interest formula to calculate interest rate A=P(1+i)n where A=Accumulated am...

Q: your required return is 7.32% how would adding ETFS with average annual returns that are expected to...

A: ETFs or exchange traded fund is a pool of securities like bonds, stocks, commodities, etc. ETF or e...

Q: The scenario is designed to help you determine and evaluate the payment amount of a car loan and a m...

A: Household income = $36,000 per year or Monthly Income = $3,000

Q: On January 1, 2020, Janet buys a bond for P10,000 that will make coupon payments of P600 after each ...

A: Annual coupon (C) = P 600 Number of coupons remaining (n) = 1 r = 4% Face value (F) = P 10000

Q: 1. What are the annual net cash inflows that will be provided by the new dipping machine? 2. Compute...

A: Companies invest only in those machines and projects are profitable. To evaluate the profitability o...

Q: Huang Industries is considering a proposed project whose estimated NPV is $12 million. This estimate...

A: Given, The NPV of the project with different probabilities.

Q: Taylor and Charlie currently live in New Orleans. Taylor is currently making $60,000 per year, and C...

A: Hi There, thanks for posting the question. But as per Q&A guidelines, we must answer the first t...

Q: Question 20 An analyst estimates that project C's expected rate of returm is 10%, your required rate...

A: To analyse a project, the expected rate of return and required rate of return are compared. if the e...

Q: Which of the following questions does the expected shortfall answer? a) How bad could things go? b) ...

A: The expected shortfall (ES) is a risk measure—a concept used to analyse a portfolio's market risk or...

Q: If you invest sh.100,000 at an interest rate of 15 percent, how much will you have at the end of eig...

A: Note: Hi! Thank you for the question, As per the Honor Code, we are allowed to answer one question i...

Q: A 5-year project will require an investment of $100 million. This comprises of plant and machinery w...

A: Capital Budgeting: It is the planning process which is undertaken by business to analyse potentia...

Q: If money is worth 5% compounded semi-annually, find the present value of a sequence of 12 semi-annu...

A: The present value of annuity needs to be calculated at the end of 4th year. Post that, the present v...

Q: Having achieved immense success since graduating from university, you have set up an endowment fund ...

A: First annual contribution (X) = $100000 Constant rate of growth (d) = - 2% (Declining rate) Interest...

Q: 2.Brian invests $15,500, at 6% interest, compounded semiannually for 2 years. Manually calculate the...

A: Investment (PV) = $15500 Interest rate = 6% Semi annual rate (r) = 6%/2 = 3% Period = 2 Years Semi a...

Q: Bob White argues that if his wage went up from $10/hour to $20/hour he would still be able to pay re...

A: Since you have posted a question with multiple questions, we will solve the first question for you. ...

Q: urvivorship

A: A life insurance policy refers to the contract between a person and the insurance company. An insu...

Q: A sum of Rs 390200 is to be paid back in three equal annual instalments. How much is each instalment...

A: The installment amount can be calculated with the help of present value of annuity function.

Q: buy a new house soon he’s considering two mortgage options. 15 year mortgage with a APR 2.75% or a 3...

A: The mortgages are paid by the monthly payment that carry the payment of interest and payment of the ...

Q: Quèstion 12 What is the covariance of returns between stocks A and B? Expected retum of A is 30% and...

A: Data given: Expected return of A =30% Expected return of B = 23.333333% Year Return A Return B ...

Q: 3. Rey borrowed P 40,000 at 12 % compounded semiannually. He agreed to pay the lender semiannually a...

A: Given that equal amount shall be paid till the end of 8th year and 6000 shall be paid at the end of ...

Q: Deposits of 10 are placed into a fund at the end of each year for 18 years with the first deposit oc...

A: The concept of the time value of money states that the same amount of money is worth more today than...

Q: What is the covariance of returns between stocks A and B? Year Retum A Retum B 2017 60% 35% 2016 20%...

A: Here, To Find: Covariance =?

Q: I won 15 000.00 on lotto, invest for 3 years so I can earn interest. Bank has offered 10% interest. ...

A: Compound interest is calculated on the opening balance of investment instead of the initial investme...

Q: Hastings Entertainment has a beta of 0.65. If the market return is expected to be 11 percent and the...

A: Required rate of return of stock can be found from the CAPM model using risk free rate and market ri...

Q: You borrow $30,000 for 10 years to pay tuition and fees. The annual interest rate is 12 percent. Wha...

A: Debt financing involves borrowing funds and returning the principal amount in addition with interest...

Q: H. CANSY Merchandising borrowed P800,000 from ABC Bank at 10% simple interest or one year and six mo...

A: H) Amount borrowed (A) = P 800000 r = 10% simple interest rate n = 1 year 6 months = 1.5 years

Q: Consider the following information and then calculate the required rate of return for the Global Equ...

A: since: Where: Ra = Expected return on an investment Rrf = Risk-free rate Ba = Beta of the investme...

Q: Keisha is taking out an amortized loan for s85,000 to open a small business and is deciding between ...

A: Amortization is an accounting technique accustomed to sporadically lowering the book value of a loan...

Q: ose an investment will pay $21,000 in 19 years from now. If you can earn 16.35% interest compounded ...

A: The today value will be the present value of future value considering the discount rate and period o...

Q: Pearce's Cricket Farm issued o 15-year, 10% semiannual bond 4 years ago. The bond currently sells fo...

A: Book value of primary debt = $60 million Book value of secondary debt = $35 million Market value of ...

Q: Imagine you work for a company that uses gainsharing. Do you think you would like it? Why or why not...

A: Gainsharing is a management system that encourages employees to improve their performance by involvi...

Q: A Treasury bond that you own at the beginning of the year is worth $1,055. During the year, it pays ...

A: Dollar return is calculated as: = (Price at end + Dividend) - Price at beginning Percentage return i...

Q: Mye has a 15-year mortgage loan at a compounded annual interest rate of 9.3%. After making annual pa...

A: Given that: Annual Cash flow=P11600 N=7 Years=7*12=84 Months r=9.3% annually= 0.93/12 Monthly =0.775...

Q: Which of the following methods will NOT achieve the client's goal of distributing property at death ...

A: In case of death of person it is necessary to transfer the wealth to the proper person for that ther...

Q: A man invests in a project that requires a fixed capital of P 2.5 M with no salvage, and life of 12 ...

A: The period in which the initial investment is recovered is known as the pay-out period. It is calcul...

Q: Ratios For Amazon.com, Inc. (AMZN) 20...

A: Ratio analysis includes the computation of ratios using elements of financial statements by keeping ...

Q: perpetual you rece ve annually starting next year if you able to deposit 130,000.00 five years ago a...

A: Here we will have to use the concept of time value of money. As per the concept of time value of mon...

Q: Minn is considering an investment proposal with the following cash flows: Initial investment-depreci...

A: Here, Initial investment-depreciable assets = $227,500 New cash inflows = $32,500 Disinvestment-depr...

Q: - Consider a firm that has EPS of $5 at the end of the first year, a dividend-payout ratio of 30%, a...

A: Discount rate is 16% Return on retained earning is 20% EPS is $5 Dividend Payout ratio is 30% To F...

Q: What is the price of the first bond (and the second bond) and Calculate j.

A: Bond valuation refers to a method which is used to compute the current value or present value (PV) o...

Q: 1. If Ysabelle borrowed money from Nina with a simple interest rate of 12%, determine the present wo...

A: The simple interest is the interest without the compounding that means there is no interest on the i...

Q: Consider the following four debt securities, which are identical in every characteristic except as n...

A: Bonds are the debt securities which are issued by the corporates or the government to raise the fund...

Question

An investment costs sh.150,000 and pays sh. 12,000 in perpetuity. If the interest rate is 9 percent, what is the PV?

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

SEE SOLUTION Check out a sample Q&A here

Step 1

VIEW

Step 2

VIEW

Step by step

Solved in 2 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.

Similar questions

Project X costs $10,000 and will generate annual net cash inflows of $4,800 for five years. What is the NPV using 8% as the discount rate?
Project A costs $5,000 and will generate annual after-tax net cash inflows of $1,800 for five years. What is the NPV using 8% as the discount rate?
Assume that an investment of 100,000 produces a net cash flow of 60,000 per year for two years. The discount factor for year 1 is 0.89 and for year 2 is 0.80. The NPV is a. 0 b. 6,800 c. 1,400 d. (4,000)
How much must be invested now to receive $50,000 for 8 years if the first $50,000 is received in one year and the rate is 10%?
Project B cost $5,000 and will generate after-tax net cash inflows of $500 in year one, $1,200 in year two, $2,000 in year three. $2,500 in year four, and $2,000 in year five. What is the NPV using 8% as the discount rate? For further instructions on net present value in Excel, see Appendix C.
Project Y cost $8,000 and will generate net cash inflows of $1,500 in year one, $2,000 in year two, $2,500 in year three, $3,000 in year four and $2,000 in year five. What is the NPV using 8% as the discount rate?
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%
Assume $100,000 is available for investment and MARR =10% per year. If alternative A would earn 25% per year on inveatment of 60,000 and B would be earn 20% per year on investment of 75000 the weighted average(ROR) of A
An investment costs $4,500 and pays $300 in perpetuity. What is the interestearned on this investment?
Investment A costs P20,000 and pays back P23,000 two years from now. Investment B costs P16,000 and pays back P9,000 each year for two years. If interest rate is 5%, what alternative is superior? Use FW method.
Which of the following is the approximate internal rate of return for an investment that costs $33,550 and provides a $5,000 annuity for 10 years? A) 5% B) 6% C) 8% D) 10%
The expected profits from a $165,000 investment are $55,000 in Year 1, $80,000 in Year 2, and $120,000 in Year 3. What is the investment’s payback period?