Fund X Return % Fund Y Return% 15 8 24 11 -3 6 5 9 5 20 -2 6 -2 14 7 13 12 4. Make a decision table using the calculations above. Which investment will the advisor recommend if his client is near retirement Years 1 2 3 4

Fund X Return % Fund Y Return% 15 8 24 11 -3 6 5 9 5 20 -2 6 -2 14 7 13 12 4. Make a decision table using the calculations above. Which investment will the advisor recommend if his client is near retirement Years 1 2 3 4

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter11: Capital Budgeting Decisions

Section: Chapter Questions

Problem 9PB: Joliet Company is considering two alternative investments. The company requires an 18% return from...

See similar textbooks

Related questions

Q: The standardized approach for calculating operational risk capital requirements uses beta factors…

A: Beta factor indicates that amount of risk involved and how much the change in market will impact on…

Q: Suppose Bank is trading share at 17$ today. The company pays dividend of 0.25. The analysts claimed…

A: Expected return = (Target Price - Current price + dividend) / Current price

Q: ooking at a $523,000 home. To avoid private mortgage insurance (PMI), she put 20% down and the…

A: LTV that is the loan to value ratio shows that how much can give the loan against property and is…

Q: Mester Corporation has provided the following Information concerning a capital budgeting project:…

A: Answer - Working Note : Depreciation expense = (Original cost – Salvage value) ÷ Useful life=…

Q: What would be your annualized discount rate% on the purchase of a 170-day Treasury bill for $4700…

A: Annualized discount rate can be calculated as: = (Maturity amount - Initial amount) / Initial amount…

Q: Fample Problem: Principal = P150,000 Period P I A rate = 18% 1 term = 1 year compounding mode…

A: The more is compounding more is accumulated interest and more is the future value of money…

Q: Consider the following cash flows. The interest rate is 8%. What is the duration (hint: you need…

A: Interest rate = 0.08 Cash flow duration is the weighted-average time to maturity of the cash…

Q: You borrow $11,331 and repay the loan with 5 equal annual payments. The first payment is supposed to…

A: The loans are paid by the equal periodic payment and these payments carry the payment of principal…

Q: A non paying dividend stock is priced at 50. Call option delta is 0.5. Stock volatility is 0.29. By…

A: Here, Spot Price is 50 Strike Price is 55 Call Option Delta is 0.5 Stock Volatility is 0.29

Q: 13. A discounted loan of $3,000 at a simple discount rate of 6.5% is offered to Mr. Jones. If the…

Q: Calculating missing cash flow On the timeline below, what is the missing cash flow at time 2? The…

A: Future Value: It is the worth of a resource at a particular date which measures nominal future sum…

Q: The following data are gathered: · The real risk-free rate is 1.05% · Inflation premium…

A: Treasury Bills: T-bills are the treasury bills issued by the government. These bills are risk-free…

Q: Suppose you purchased a stock a year ago. Today, you receive a dividend of $16 and you sell the…

A: To calculate the purchase price of stock we will solve the following equation Rate of return =…

Q: 4. In a CDS the accrual payment is a payment made by CDS and occurs when the to CDS defaults a.…

A: Reference entity is the entity that issues bond CDS buyer is the holder of Reference entity bonds.…

Q: The company DstriBut.inc decides to take a technological shift by replacing its old distribution…

A: Given, The cost of equipment is $6,000,000. Depreciation rate is 30%

Q: Please critically evaluate and discuss in detail how a deferred tax provision can arise under IAS…

A: Typically, publicly listed corporations are held to high standards. Small and midsized enterprises…

Q: Complete the following, using ordinary interest. (Use Days in a year table.) (Do not round…

A: Ordinary Interest: Ordinary Interest is computed based on the 360 days per year (or 30 days a…

Q: National Co.’s capital structure consists entirely of long-term liabilities and common equity. The…

A: WACC = (Ke*Wk) + (Kd*(1-t)*Wd) Where Ke = Cost of equity Kd = Cost of debt Wk = weight of equity…

Q: With reference to IAS 16 (Property, Plant and Equipment), discuss the differences between “the cost…

A: Except when another standard requires or enables other accounting treatments, such as assets…

Q: Discuss the relative merits of different methods of corporate growth (e.g. internal development,…

A: Corporate expansion strategies and their accompanying economic benefits may be classified into at…

Q: Identify which anti-hostile takeover strategies are being described. [S1] A merger will only push…

A: When a prospective merger or acquisition needs to be thwarted then there are several anti-hostile…

Q: The following are the assumptions of the Modigliani and Miller approach, EXCEPT A. Investors think…

A: According to MM hypothesis, dividend decision is irrelevant for the value of firm. In other words,…

Q: As you can see in the graph below, two alternatives of A and B are compared to each other. What do…

A: Analysis of Graph: At x%, PWA and PWB intersects. At y%, PWA touches the axis Cross over…

Q: Only answer question 1 to 3 You are a personal finance advisor at the BQ bank, and you receive in…

A: A mortgage is a loan on a property where the collateral is the property itself.

Q: Suppose the term structure of risk-free interest rates is as shown below. 2 yr Term 1 yr 3 yr 5 yr 7…

A: Given, The EAR for year 1 to 20

Q: True or False a.) Generally, even though the acquisitions are recent, the net realizable value of…

A: Synergy: Synergy occurs when two entities combine together their resources to accomplish more…

Q: What is the expected return on common shares of Cisco Systems, Inc. (It designs, manufactures, and…

A: The expected return on common shares of Cisco Systems, Inc. is 11.356%.

Q: On the basis of these data, the real risk-free rate of return is 3% 2% 0% 1%

A: Real risk-free rate refers to the rate of interest that is expected by the investors on the…

Q: Why might a large corporation want to raise long-term capital through a borrowing money from…

A: Raising money from financial institutions increases the likelihood of finding investors who share…

Q: The following statements relate to derivatives. Which of the following is FALSE? a. Swaps may have…

A: Options are contingent claims, while swaps and future contract are forward commitments. This implies…

Q: What is the present value of a $360 payment in one year when the discount rate is 9 percent? (Round…

A: Payment in 1 year (P1) = $360 n = 1 year r = 9%

Q: To buy his favorite car, Larry is planning to accumulate money by investing his Christmas bonuses…

A: Cost of car = $20,000 Yearly payment (p) = $3,000 Interest rate (i) = 0.10 Period (n) = 5 years…

Q: Assume that a company has provided the following information regarding a capital investment…

A: Present value of a future amount With discount rate (r), period (n) and future amount (F), the…

Q: 3. Maricel borrows P 10 000 with interest at 15% compounded monthly. How much should she pay at the…

A: Future Value = Present Value*(1+Interest rate)n Where n = Time period

Q: Given fixed costs is Rs 1,00,000 selling price per unit is Rs 10 and variable cost per unit is Rs 6.…

A: Since you have posted multiple questions, as per answering guidelines we shall be solving first…

Q: The quoted rate of a short-term government security is 2%. A premium of 3% is added to the risk-free…

A: As per formula Required rate of return = RF+(B*RP) Where RF - Risk free rate i.e. 2% RP - Risk…

Q: identify at least three positives and three negatives about the loan request

A: Loan Application: The document on which the lender bases its loan decision. A loan application is…

Q: Identify the type of merger in the following case: ABC manufactures furniture. It acquired a…

A: Merger means acquistion of one business by another. There are two parties involved in merger…

Q: A middle-aged school teacher is dreaming about retirement. She believes she can comfortably leave…

Q: Discuss to what extent deferred tax accounting can be used for income smoothing.

A: Deferred tax is referred as an income taxes for the tax on the losses or profits of the company…

Q: poking to purchase a home that costs $ 160,000. The interest rate is currently at 3.7 %. payment…

A: Mortgage loans are paid by equal monthly payments that carry the payment of interest and payment of…

Q: 13. A discounted loan of $3,000 at a simple discount rate of 6.5% is offered to Mr. Jones. If the…

A: The amount of discount depends on the period and interest rate and amount of the loan taken and cash…

Q: uity X and Y provide the following payments: End of Year Y 1-10 1 K 11-20 2 21-30 1 K Annuity X and…

A: Annuity is a stream of constant regular payments.

Q: In 1999, the euro was trading at $0.82 per euro. If the euro is now trading at $0.99 per euro, what…

A: To calculate the percentage change in euro's value we will use following formula Percentage change…

Q: Contraction risk is the risk that loan principal will be repaid more rapidly than expected,…

A: The statement is FALSE. Correct Statement: Contraction risk is the risk that loan principal will be…

Q: You have $21,600 to invest in a stock portfolio. Your choices are Stock X with an expected return of…

A: To calculate the investment in stock X we will solve the following equation Portfolio return =…

Q: Question 1 You recently went to work for Ndejiku Company, a supplier of auto repair parts used in…

A: The payback period is used to calculate the time required to cover the initial investment. The net…

Q: u observe the following information regarding Company ABC and Company XYZ: · Company ABC has a…

A: The standard deviation show risk related to the company and beta show the risk related to the…

Q: The current exchange rate between the Japanese yen and the U.S. dollar is ¥90 per dollar. If the…

A: The exchange rate is the rate at which one currency can be bought for another. Depreciation of a…

Q: The cost of goods sold computations for Wildhorse Company and Blossom Company are shown below.…

A: The inventory turnover ratio is used to measure how quickly inventory is replaced or sold. The days…

Concept explainers

Emergency Fund

The emergency fund is an amount that is kept aside to meet financial emergencies such as medical expenses and debt settlements. Emergency funds reduce the burden on people during their hardships. People save small portions of their earnings or paychecks as emergency funds to meet financial emergencies. Emergency funds should be saved or invested in such a way that they must be easily liquidated during emergencies. The main purpose of an emergency fund is its availability when required.

Question

Years
1
2
3
4
5
6
14
7
13
12
4. Make a decision table using the calculations above. Which investment will the advisor
recommend if his client is near retirement
Fund X Return %
15
24
-3
5
20
-2
Fund Y Return %
8
11
6
9
-2

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

Step 2

Step 3

Step 4

Step 5

Step by step

Solved in 5 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

Two investors participate in an investment project and, after an analysis economic, the following results were obtained: • Investor A. TMAR: 13.45; NPV: 570,000. • Investor B. TMAR: 13:00; NPV: −2450. Explain the value of the results of investor B based on the recovery of your investment, profits and your minimum acceptable rate of return.
Joliet Company is considering two alternative investments. The company requires an 18% return from its investments. Compute the IRR for both Projects and recommend one of them. For further instructions on internal rate of return in Excel, see Appendix C.
According to Wald's criterion, which investment is decided by looking at the profitability of three investments such as S1, S2 and S3 in the following economic environments? Ekonomik Durumlar S1 S2 S3Canlı Ekonomik Durum 13 6 7Normal Ekonomik Durum 10 9 8Durgun Ekonomik Durum 7 14 4Resesyon Durumu 8 7 15 Economic Conditions S1 S2 S3 Vivid Economic Situation 13 6 7 Normal Economic Condition 10 9 8 Stagnant Economic Condition 7 14 4 Recession Condition 8 7 15
An investor is evaluating the historical performance of an investment fund. The following annual returns are provided to the investor: Fund Value Year 0 $120 Year 1 132 Year 2 146 Year 3 133 Year 4 128 Year 5 123 Required: a. Calculate the investment returns for each year. b. Compute the arithmetic mean return. c. Calculate the geometric mean return.
A company is thinking in investing in one of two potential new products for sale. The projections are as follows: year Revenue/cost £ (Product S) Revenue/cost £ (Product V) 0 (150,000) outlay (150,000) outlay 1 14000 15000 2 24000 25333 3 44000 52000 4 84000 63333 a) Calculate the IRR for Product V only using 1% and 17% to 2 d.p.b) Outline the advantages and disadvantages of the IRR and payback using appropriate academic sources.
An investor has a certain amount of money available to invest now. Three alternative investmentsare available. The estimated profit in Kwacha of each investment under each economic conditionare indicated in the following payoff table:Event Investment SelectionA B CEconomy declines 500 -2000 -7000No charge 1000 2000 -1000Economy Expand 2000 5000 20,000Based on his own past experience, the investor assigns the following probabilities to eacheconomic condition:( )( )( )Economy declines 0.30No change 0.50Economy expands 0.20PPP===vii. Compute the coefficient of variation for each investment. viii. Compute the return-to-risk ratio (RTRR) for each investment.ix. Based on (vii) and (viii), what investment would you choose?
You must choose between two investments, G and W. The profitability index (PI), net present value (NPV) and internal rate of return (IRR) of the two investments are as follows: Criteria Investment G Investment W NPV –12 000 40 000 PI 0,985 1,053 IRR 20% 24% Which investment(s) should you choose, considering all the above criteria, if the cost of capital is equal to 21% per year
Assume that you were given $100,000 to invest in financial assets, discuss the following: Explain what your investment portfolio would look like. Share what you believe is your risk tolerance
You have been asked for your advice in selecting a portfolio of assets and have been given the following data: Expected return Year Asset A Assest B Assest C 2019 12% 16% 12% 2020 14% 14% 14% 2021 16% 12% 16% You have been told that you can create two portfolios—one consisting of assets A and B and the other consisting of assets A and C—by investing equal proportions (50%) in each of the two component assets. a. What is the expected return for each asset over the 3-year period? b. What is the standard deviation for each asset’s return? c. What is the expected return for each of the two portfolios? d. How would you characterize the correlations of returns of the two assets making up each of the two portfolios identified in part c? e. What is the standard deviation for each portfolio? f. Which portfolio do you recommend? Why?
Bhavika Investments, a group of financial advi-sors and retirement planners, has been requested to provide advice on how to invest $200,000 forone of its clients. The client has stipulated thatthe money must be put into either a stock fund ora money market fund and the annual return shouldbe at least $14,000. Other conditions related to riskhave also been specified, and the following linear program was developed to help with this invest-ment decision: Minimize risk = 12S + 5Msubject toS + M = 200,000 total investment is$200,000 0.10S + 0.05M Ú 14,000 return must be at least $14,000 M Ú 40,000 at least 40,000 must bein money market fund S, M Ú 0whereS = dollars invested in stock fundM = dollars invested in money market fundThe QM for Windows output is shown below.(a) How much money should be invested in themoney market fund and the stock fund? What isthe total risk?(b) What is the total return? What rate of return isthis?(c) Would the solution change if the risk measurefor each dollar…
Quilts R Us (QRU) is considering an investment in a new patterning attachment with the cash flow profile shown in the table below. QRU’s MARR is 13.5%/year. Solve, a. What is the present worth of this investment? b. What is the decision rule for judging the attractiveness of investments based on present worth? c. Should QRU invest?
Hi can you help with this question please? An investment has the following cash flow profile. For each value of MARR below, what is the minimum value of X such that the investment is attractive based on an internal rate of return measure of merit? EOY 0 1 2 3 4 Cash Flow $(30,000.00) $ 6,000.00 $ 13,500.00 $X $ 13,500.00 MARR is 12 percent/year