Consider a firm with a contract to sell an asset for $220,000 seven years from now. The asset costs $75000 to produce today. Given a relevant discount rate on this asset of 7.5 percent per year, will the firm make a profit on this asset? At what rate does the firm just break even
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Consider a firm with a contract to sell an asset for $220,000 seven years from now. The asset costs $75000 to produce today. Given a relevant discount rate on this asset of 7.5 percent per year, will the firm make a profit on this asset? At what rate does the firm just break even
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- Consider a firm with a contract to sell an asset for $151,000 four years from now. The asset costs $96,000 to produce today. a. Given a relevant discount rate on this asset of 13 percent per year, calculate the profit (or loss) the firm will make on this asset. b. At what rate does the firm just break even? a.Consider a firm with a contract to sell an asset for $154,000 five years from now. The asset costs $90,000 to produce today. a. Given a relevant discount rate of 13 percent per year, calculate the profit the firm will make on this asset. (A loss should be indicated by a minus sign. Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) b. At what rate does the firm just break even? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) a. Firm's profit (loss) b. Break-even rate %Red-Star Co. wants to sell an electrical generator for AED 165,000 in 2024. The price of this generator in the market today is AED 94,000 (according to GE company who is the producer of this generator). If the discount rate on this generator is 9.5 percent per year. Do you think the firm will make a profit if they sell this generator? What is the rate that will make the firm breakeven? Note: Profit = Revenue -cost
- Red-Star Co. wants to sell an electrical generator for AED 165,000 in 2024. The price of this generator in the market today is AED 94,000 (according to GE company who is the producer of this generator). If the discount rate on this generator is 9.5 percent per year. Do you think the firm will make a profit if they sell this generator? What is the rate that will make the firm breakeven?The Wildwood Widget Company needs a milling machine for its new assembly line. The machine presently costs $85,000, but has a cost inflation rate of 2%. Widget will not need to purchase the machine for 3 years. If general inflation is expected to be 4% per year during those 3 years, determine the price of the machine. What is the present worth of the machinery if the market rate of interest for Widget is 25%?If a small company is purchased now for $55,000 it will lose $9,500 each year for the first four years. An additional investment of $30,000 at the end of the fourth year will result in a yearly profit of P30,000 from the fifth through the tenth year. Then on the tenth year the company can be sold for $75,000. If the rate of return is 20%, will you buy the company? Use PWM.
- You bought a new machine worth P 345,000.00. Research on this machine showed that it will reduce cost of production in the following sequence: Year 1 = P 22,500; Year 2 = P27,300; Year 3 = 30,500.00; Year 4 = 32,450 and Year 5 = 29,600. If the current interest rate is 7.2%. Should the machine be bought?Optimal corporation wants to expand their manufacturing facilities. They have two choices, first to expand the current site at a cost of $290,000 per year for two years to complete the expansion, or to sell their current site for $1.3 million and purchase a new larger facility at a cost of $900,000 in the industrial zone. If the annual interest rate is 8%, And the Optimal corporation wants to factor inflation in their calculations, what is the equivalent nominal interest rate if expected inflation rate is 4% in the coming years? Critically discuss the significance of including the factor of inflation in corporate finance calculationsA company is buying a machine. They can pay a $45,000 downpayment now, and pay %15,000 every month for the life of the machine (7 years), or they can pay teh full marks value of the machine now. If the salvage value is expected to be $250,000 and can borrow money at an interest rate of 9%, compounded monthly, what is the maximum amount that the company should pay for the machine today such that the chouices should be equivalent? a. 817,253 b. $853, 946 c. $840,551 d. $843,848 e. None of the above : List answer ______ Please use excel and show formulas.
- A construction firm needs a new small loader. It can be purchased for $20,000. The firm expects the loader to have a salvage value of $6,000 after 7 years. The maintenance cost will be $1,400 each year. The firm's interest rate is 1% per year. Compute the Equivalent Uniform Annual Worth (EUAW).Suppose you work for a software company that has developed a new product. The patent on this product will last for seventeen years. You expect that the product will produce cash-flows of $10,000,000 in its 1st year and that this amount will grow at a rate of 4 percent per year for the next seventeen years. Once the patent expires, your competitors will be able to produce equivalents copies of your software and drive any future profits to zero. If the interest rate is 11 percent per year, then what is the present value of producing this software?It costs a risk neutral firm £800 to set up a factory (fixed cost). The factory can produce one unit of output per year forever. The current price of a unit of output is £100. The product price is currently uncertain. In the next period the price will increase or decrease by 50% (with equal probability) and remain fixed forever at the level it has reached. The interest rate is 10%. a) According to NPV, should the firm invest now? This means spending £800 in the current period and selling the first unit of output for £100 today and either £150 forever afterwards or £50 forever afterwards (with equal probability). b) What is the real option value of waiting to see whether the price goes up or down? This means investing £800 next period and getting the appropriate price forever. c) If the price for deferred investment is higher (the firm has to invest £I > £800 at the beginning of next period) how high can it be before the firm will choose to invest now? d) How would your…