As CFO of a small manufacturing firm, you have been asked to determine the best financing for the purchase of a new piece of equipment. The vendor is offering repayment options of $9,000 at the end of each year for five years, or no payment for two years followed by one payment of $41,500. The current market rate of interest is 11%. Calculate present value of both options. Pv option 1= option 2=

Q: As a financial analyst, you must evaluate a proposed project to produce printer cartridges. The…

A: As depreciation at t = 0 is being fully depreciated, therefore depreciation will $0.

Q: A development company would like to purchase a group of condominiums with an annual cash flow of…

A: The maximum amount that the company can pay is the present value of the all cash flows that can be…

Q: RKE & Associates is considering the purchase of a building it currently leases for $30,000 per year…

A: NAL (Net advantage to Lease) is benefits that an entity might geberate by leasing an equipment…

Q: A self-employed chemical engineer is on contract with Dow Chemical, currently working in a…

A: PW means PV of cashflows which will occur in the future. It is computed though discounting in which…

Q: John decided to purchase a firm which is expected to generate net cash flows of $5,000 o year from…

A: Given information : Year Cash flows 1  $    5,000.00 2  $    2,000.00 3  $    2,000.00 4…

Q: Your factory has been offered a contract to produce a part for a new printer. The contract would…

A: Net Present Value (NPV) Net present value is defined as the summation of the present value of cash…

Q: A bank is planning to make a loan of sh.5,000,000 to a firm in the steel industry. It expects to…

A: The risk-adjusted return on capital (RAROC) is a modified return on investment (ROI) metric that…

Q: Kitchen Enterprises is evaluating a proposal to  lengthen its credit period from 30 to 45 days. All…

A: Accounts receivables are those customer accounts to whom business has made credit sales on account…

Q: Decide on the following problems by determining the fair market value. Show your solutions in a…

A: The fair market value: The fair market value is the price that one can expect to purchase the cash…

Q: Downtown Partners is considering an investment of $500,000 in an early stage company, Newco.…

A: The required rate of return means the least profit an investor expects to collect from the…

Q: Deep Excavating Inc. is purchasing a bulldozer. The equipment has a price of $106,000. The…

A: Here, Cost of equipment = $ 106,000 Number of equal annual payment = 10 Equal annual payment = $…

Q: OUR FIRM IS CONSIDERING THE PURCHASE OF AN OLD OFFICE BUILDING WITH AN ESTIMATED REMAINING SERVICE…

A:

Q: Which offer ha a better market value? Company A offers Php 150,000.00 at end of 3 years plus Php…

A: Given a certain rate of return, present value (PV) is the current value of a future sum of money or…

Q: In March 2020, the management team of Londonderry Air (LA) met to discuss a proposal to purchase…

A: First we confirm some of the numbers cited in the case:   Market value of bonds:     Value of…

Q: The controller has asked you to consider three separate options that your firm has for getting a new…

A: Annual Lease payment for 5 years as follows: Years ALP ALP (Net of Tax) PVF @ 10% PVF ($) 1 15…

Q: otse Automotive is planning to expand its operation by planning to add a machine costing $90.000.…

A: Solution : Company Will choose Loan V/S Lease option which provide the lower Negative option.

Q: for five years. Should the project be undertaken, if the small business owner would nal value after…

A: Net Present Value: It is estimated by the difference between the present value of cash flows and…

Q: An investor is considering the purchase of a rental house for $120,000. The house generates monthly…

A: The expected return is the annualized return from this investment over a period of 5 years. This is…

Q: An investor is considering the purchase of a rental house for $120,000. The house generates monthly…

A: given, house price = $120,000 monthly rent = $1,150 operating expense=$4800 years = 5 selling price…

Q: As a financial analyst, you must evaluate a proposed project to produce printer cartridges. The…

A: NPV is the net current worth of cash flows that are expected to occur in the future. It is…

Q: Marko, Inc., is considering the purchase of ABC Co. Marko believes that ABC Co. can generate cash…

A: given information cash inflows are $5800 $10,800 $17,000 rate of return = 12%

Q: As a financial analyst, you must evaluate a proposed project to produce printer cartridges. The…

A: Answer of the cash flow is $73000  In worst case scenario the sales will dip to 3200 sales= 3200*50…

Q: Ford Motor Company just hired a new CFO who finds that they have a five year floating rate borrowing…

A: LIBOR flat: It is the LIBOR rate in which adjustments have not been made.

Q: An investor is considering the purchase of a rental house for $120,000. The house generates monthly…

A: IRR is the rate of return a project generates through its lifetime expressed in annual terms. It is…

Q: RKE & Associates is considering the purchase of a building it currently leases for $30,000 per…

A: The number of years that will take to recover the investment at given interest rate can be…

Q: A financial manager is considering two possible sources of funds necessary to finance a $10,000,000…

A: Formula: Projected earnings=EBIT-Interest-Tax

Q: Kotse Automotive is planning to expand its operation by planning to add a machine costing $90,000.…

A: To choose between Option 1 and Option 2, it is required to calculate and compare Present Value Cost…

Q: A Services company is projecting that demand for its services will rise considerably the next three…

A: Leasing help the company to use the asset immediately without buying it at a huge cost. On the other…

Q: Boatler Used Cadillac Co. requires $850,000 in financing over the next two years. The firm can…

A: Short term finance alludes to financing needs for a small period ordinarily less than a year. In…

Q: Rocky Mountain Bus Tours needs an additional bus for three years. It can lease a bus for $2100…

A: Present value of annuity due (payment due at the beginning of each month) = Payment x [1 - (1 +…

Q: Montclair Manufacturing is considering leasing some equipment. The annual lease payment would be…

A: Given: Particulars Amount Interest rate 7% Tax rate 25% Years (NPER) 9 Annual lease…

Q: enkins Security has learned that a rival has offered to supply a parking garage with security for…

A: Time has been precious in all perspectives, however in terms of finance, time has a monetary value.…

Q: the bank should make the loan.

A: Solution: RAROC model: “Risk-adjusted return on capital” A model evaluates the expected return on…

Q: Super Sonics Entertainment is considering buying a machine that costs $445,000. The machine will be…

A: NAL or net advantage of lease is simply the benefit of lease over buying optionz it is given by NAL…

Q: Hat Corp. can pursue 2 alternative investments. In the first investment, they will receive $3000 per…

A: Please refer to the image below.

Q: A firm needs to either buy or lease $200,000 worth of equipment. The equipment has a life of 5 years…

A: Leased at a cost = $45,000Tax shield = Lease payment ×Tax rateTax shield = 45000 ×33%Tax shield =…

Q: Turner plc is considering whether to buy a machine costing K100,000 through a three-year loan with…

A: Decision-making between buying with a loan and leasing out can be done by making a comparison of NPV…

Q: Joanna Browne is considering either leasing or purchasing a new Chrysler Sebring convertible that…

A: Given, Retail price suggested = $33,000 Capital payment = $3,300 Monthly payment = $494 Down payment…

Q: Ramsis is a heavy equipment rental company. It is considering the purchase of Tower crane at a price…

A: Capital budgeting is the process by which a corporation examines potential large projects or…

Q: An investment company is considering one of two possible business ventures. Project 1 gives a return…

A: Net Present Value- It is the difference between the present value of cash inflows and the present…

Q: John decided to purchase a firm which is expected to generate net cash flows of $5,000 one year from…

A: Net Cash Flow in one year = 5000 Net Cash Flow in seven years = 10,000 Annual Cash Flow = 2000 N =…

Q: Assume that a money manager is considering the buy of a $35,000 machine and that he appraises that…

A: The question is to take a decision to buy a machine based on expected interest rate earing and…

Q: RKE & Associates is considering the purchase of a building it currently leases for $30,000 per…

A: Investment recovery Investment Amount / Lease per year = PVAF ( Interest rate, years )

Q: You are contemplating on purchasing a new motorcycle. Kangaroo Autos and Turtle Motors are both…

A: An asset can be purchased by paying cash or by paying regular installments or a combination of cash…

Production Budget

A budget can be defined as a financial plan designed by an undertaking for a definite period in the future that can contribute towards enhancing the financial success of the business undertaking. It is used to estimate the revenue and expenses. The budget generally takes into account both current and future income and expenses.