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A: Solution:Margin refers to the amount of money required to be deposited with the clearing house at…
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A: Solution:Zero Coupon Bond (ZCB) is the bond which does not provide coupon payments during its…
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A: This is based on the dividend discount model. As per the dividend discount model the value of a…
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A: Constant growth rate is that rate of increase in value under which value of any assets will increase…
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A: Amortization refers to the systematic periodic repayment of mortgage amount spread over the…
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A: As per the percentage of sales, the forecasted values such as income, cost of goods sold,…
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A: Rp (Return on stock) = 8.45% or 0.0845 in decimal Rf (Risk-free rate) = 2.25% or 0.0225 in decimal…
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A: Solution:Gordon Growth Model (GGM) is the equity model which measures current price of share.For the…
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A: Standard deviation is indicated as the variations average amount in the set of data. It is helpful…
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A: Solution:-When an equal amount is invested each periodat end of period, it is called ordinary…
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A: Solution:Bond price means the price at which a bond should trade in the market. It is the summation…
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A: Solution:-When an equal amount is invested each periodat end of period, it is called ordinary…
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A: The sensitivity analysis considered the different types of market conditions or the different type…
Q: You deposit $63000 into an account which pays 5% compounded semiannually. How much can you withdraw…
A: Given:Principal (P) = $63,000Rate (r) for every six months = 5%Semi-Annually Rate = 5%/2 = 0.025…
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A: IPO is initial public issue in which for the first time shares are issued to general public and…
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A: Retirement planning is the act of setting financial goals and making strategic decisions to ensure a…
Q: Date 1/1/2024 /30/2024 $11,500 11,500 11,500 11,500 11,500 11,500 31/2024 30/2025 31/2025 30/2026…
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Q: Why might a business get a loan? Buy inventory Pay its taxes Buy a yacht Pay off another loan Any of…
A: Solution:Loan refers to the borrowing made by the entity for any of the business purpose.
Q: you want to establish an annuity that will pay $7,500 for the next twenty years (end year) your…
A: Present value is an estimate of the present value of future cash values that may be received at a…
Q: REQUIRED Use the information provided below to calculate the Accounting Rate of Return on average…
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A: Loan Installment is that under which borrwer will paid the fixed amount each month to lendor against…
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A: Internal rate of return is the break even rate at which present value of future cash flow is equal…
Q: A few years ago, Zabar Technology issued an annual bond that has a face value equal to $1,000 and…
A: Solution:-Bond price means the price at which a bond should trade in the market. It is the summation…
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A: Variables in the question:Loan amount=$100,000 Interest=9% Monthly payment=$1550Outstanding balance…
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A: Solution:Gordon Growth Model (GGM) is the equity model which measures current price of share.For the…
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A: Free cash flow refers to the cash flow available to the capital providers after deducting the…
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A firm can lease a truck for 4 years at a cost of $30,000 annually. It can instead buy a truck at a cost of $80,000, with annual maintenance expenses of $10,000. The truck will be sold at the end of 4 years for $20,000. What is the equivalent annual cost of buying and maintaining the truck if the discount rate is 10%? Note: Do not round intermediate calculations. Round your answer to 2 decimal places.
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- Gardner Denver Company is considering the purchase of a new piece of factory equipment that will cost $420,000 and will generate $95,000 per year for 5 years. Calculate the IRR for this piece of equipment. For further Instructions on internal rate of return in Excel, see Appendix C.Caduceus Company is considering the purchase of a new piece of factory equipment that will cost $565,000 and will generate $135,000 per year for 5 years. Calculate the IRR for this piece of equipment. For further instructions on internal rate of return In Excel, see Appendix C.Grummet Company is acquiring a new wood lathe with a cash purchase price of $80,000. The Wood Master Industries (the manufacturer) has agreed to accept $23,500 at the end of each of the next 4 years. Based on this deal, how much interest will Grummet pay over the life of the loan? A. $94,000 B. $80,000 C. $23,500 D. $14,000
- Dauten is offered a replacement machine which has a cost of 8,000, an estimated useful life of 6 years, and an estimated salvage value of 800. The replacement machine is eligible for 100% bonus depreciation at the time of purchase- The replacement machine would permit an output expansion, so sales would rise by 1,000 per year; even so, the new machines much greater efficiency would cause operating expenses to decline by 1,500 per year The new machine would require that inventories be increased by 2,000, but accounts payable would simultaneously increase by 500. Dautens marginal federal-plus-state tax rate is 25%, and its WACC is 11%. Should it replace the old machine?Now assume that it is several years later. The brothers are concerned about the firm’s current credit terms of net 30, which means that contractors buying building products from the firm are not offered a discount and are supposed to pay the full amount in 30 days. Gross sales are now running $1,000,000 a year, and 80% (by dollar volume) of the firm’s paying customers generally pay the full amount on Day 30; the other 20% pay, on average, on Day 40. Of the firm’s gross sales, 2% ends up as bad-debt losses. The brothers are now considering a change in the firm’s credit policy. The change would entail: (1) changing the credit terms to 2/10, net 20, (2) employing stricter credit standards before granting credit, and (3) enforcing collections with greater vigor than in the past. Thus, cash customers and those paying within 10 days would receive a 2% discount, but all others would have to pay the full amount after only 20 days. The brothers believe the discount would both attract additional customers and encourage some existing customers to purchase more from the firm—after all, the discount amounts to a price reduction. Of course, these customers would take the discount and hence would pay in only 10 days. The net expected result is for sales to increase to $1,100,000; for 60% of the paying customers to take the discount and pay on the 10th day; for 30% to pay the full amount on Day 20; for 10% to pay late on Day 30; and for bad-debt losses to fall from 2% to 1% of gross sales. The firm’s operating cost ratio will remain unchanged at 75%, and its cost of carrying receivables will remain unchanged at 12%. To begin the analysis, describe the four variables that make up a firm’s credit policy and explain how each of them affects sales and collections.Shonda & Shonda is a company that does land surveys and engineering consulting. They have an opportunity to purchase new computer equipment that will allow them to render their drawings and surveys much more quickly. The new equipment will cost them an additional $1.200 per month, but they will be able to increase their sales by 10% per year. Their current annual cost and break-even figures are as follows: A. What will be the impact on the break-even point if Shonda & Shonda purchases the new computer? B. What will be the impact on net operating income if Shonda & Shonda purchases the new computer? C. What would be your recommendation to Shonda & Shonda regarding this purchase?
- A restaurant is considering the purchase of new tables and chairs for their dining room with an initial investment cost of $515,000, and the restaurant expects an annual net cash flow of $103,000 per year. What is the payback period?Conestoga Plumbing plans to invest in a new pump that is anticipated to provide annual savings for 10 years of $50,000. The pump can be sold at the end of the period for $100,000. What is the present value of the investment in the pump at a 9% interest rate given that savings are realized at year end?Big Sky Mining Company must install 1.5 million of new machinery in its Nevada mine. It can obtain a bank loan for 100% of the purchase price, or it can lease the machinery. Assume that the following facts apply. (1) The machinery falls into the MACRS 3-year class. (2) Under either the lease or the purchase, Big Sky must pay for insurance, property taxes, and maintenance. (3) The firms tax rate is 25%. (4) The loan would have an interest rate of 15%. It would be nonamortizing, with only interest paid at the end of each year for four years and the principal repaid at Year 4. (5) The lease terms call for 400,000 payments at the end of each of the next 4 years. (6) Big Sky Mining has no use for the machine beyond the expiration of the lease, and the machine has an estimated residual value of 250,000 at the end of the 4th year. a. What is the cost of owning? b. What is the cost of leasing? c. What is the NAL of the lease?
- Falkland, Inc., is considering the purchase of a patent that has a cost of $50,000 and an estimated revenue producing life of 4 years. Falkland has a cost of capital of 8%. The patent is expected to generate the following amounts of annual income and cash flows: A. What is the NPV of the investment? B. What happens if the required rate of return increases?The Ham and Egg Restaurant is considering an investment in a new oven that has a cost of $60,000, with annual net cash flows of $9,950 for 8 years. The required rate of return is 6%. Compute the net present value of this investment to determine whether or not you would recommend that Ham and Egg invest in this oven.Each of the following scenarios is independent. All cash flows are after-tax cash flows. Required: 1. Patz Corporation is considering the purchase of a computer-aided manufacturing system. The cash benefits will be 800,000 per year. The system costs 4,000,000 and will last eight years. Compute the NPV assuming a discount rate of 10 percent. Should the company buy the new system? 2. Sterling Wetzel has just invested 270,000 in a restaurant specializing in German food. He expects to receive 43,470 per year for the next eight years. His cost of capital is 5.5 percent. Compute the internal rate of return. Did Sterling make a good decision?
