What is the limitation of payback method as a form of investment appraisal?

Q: The resident Economist in the Investment Firm you work for has generated th following expected…

A: The Capital Asset Pricing Model is a popular financial model that analysts and investors use to…

Q: Noma plans to save $4,100 per year for the next 40 years. If she can earn an annual interest rate of…

A: Future value of the money is the amount of deposit done and amount of compounded interest…

Q: Use the present value tables in Appendix A and Appendix B to compute the NPV of each of the…

A: A finance term called net present value (NPV) is used to assess how profitable a project or…

Q: Suppose a project has the following cashflows and the discount rate (required return) is 12%. t 0 1…

A: The discounted payback period refers to the time it takes for the cash flows, that have been…

Q: Peter wants to retire in 40 years and to have $3 million. He feels that he can save $688 per month…

A: The concept of time value of money will be applied here. As per the concept of time value of money…

Q: The most recent dividend paid by company J was 2.45 per share. You think dividends will grow at a…

A: The growth rate is a financial tool. growth rate is the anticipated or estimated rate of change in…

Q: 11) A new robotic welder can be leased for 5 years with annual payments of he first payment…

A: Lease is kind of finance arrangement in which heavy equipments can used for payment for annual…

Q: 5. A Loan Amortization can help a Manager take advantage of lower interest rates. T/F 6. IRR can be…

A: True.Loan amortization refers to the process of paying off a loan over a specific period of time…

Q: A pension plan must make total disbursements of $2.7 million, $3.7 million, and $2.7 million…

A: The time value of money technique explains the concept that the rupee received today is worth more…

Q: Jarett & Sons's common stock currently trades at $22.00 a share. It is expected to pay an annual…

A: Calculate the cost of equity as follows:Cost of equity Therefore, the cost of equity is 10.82%.

Q: The Tennis Shoe Company has concluded that additional equity financing will be needed to expand…

A: Right shares are shares issued to existing shareholders for raising money for expansion and growth…

Q: 12) A cost-cutting project will decrease costs by $65,700 a year. The annual depreciation will be…

A: Operating cash flow is the amount which is earned by the investor from the project. It includes the…

Q: Winnebagel Corp. currently sells 39,807 motor homes per yea at $66,583 each and 9,823 luxury motor…

A: Number of units of motor homes sold = 39,806Selling price of motor homes = $66,583Number of units of…

Q: A bond is issued with a coupon of 5% paid annually, a maturity of 31 years, and a yield to maturity…

A: A bond refers to an instrument that is used to raise debt capital for the issuing company from…

Q: What is the nominal annual rate of interest compounded monthly if a 9-year loan of $57,300 is repaid…

A: Here,LoanAmount is $57,200Time Period of Loan is 9 yearsMonthly Payment of Loan is $781.91

Q: The current price of Natasha Corporation stock is $6.27. In each of the next two years, this stock…

A: A put option is the derivative instrument that allows the investor or the holder to sell the given…

Q: Week 1 2 3 Day Monday Tuesday Wednesday Thursday Friday Monday Tuesday Wednesday Thursday Friday…

A: 3 day average = (Day 1 + Day 2 + Day 3 )/35 day average = (Day 1 + Day 2 + Day 3 + Day 4+ Day 5 )/5

Q: Bi-Lo Traders is considering a project that will produce sales of $48,250 and have costs of $27,500.…

A: Operating Cash flow is the amount which is earned by the investor from the project. It is the net…

Q: Jill's Wigs Inc. had the following balance sheet last year: Cash Accounts receivable Inventory Net…

A: Outside capital refers to the amount of money that is raised by using external sources. These mainly…

Q: Quad Enterprises is considering a new three-year expansion project that requires an initial fixed…

A: NPV is also known as Net Present Value.. It is a capital budgeting technique which helps in decision…

Q: You have an opportunity to acquire a property from First Capital Bank. The bank recently obtained…

A: Here,Cost of Property $       296,000.00Acquisition Expenses $         12,100.00Monthly Repairing…

Q: Calculate the present value of the following annuities, assuming each annuity payment is made at the…

A: Using Excel function: =PV(rate,nper,pmt,fv,type)Option 1) =PV(9%/2,3*2,-5600)= 28,884.09Rate= 9%/2 =…

Q: rrent Attempt in Progress State of the Economy Recession Average Boom Probability of Occurrence O…

A: State of economyProbability of occurrenceStock X expected returnStock Y expected returnStock Z…

Q: You borrow $30,000 for 4 years under an amortized loan plan. Its interest rate is 7% APR. How much…

A: In amortized loan, there is interest on loan balance at the given time and interest is on reducing…

Q: Assume today's settlement price on a CME EUR futures contract is $13176/EUR. You have a short…

A: In the futures there will be late delivery of contracts after a specified period and there is market…

Q: You want to retire in 20 years. You currently have $200,000, and think you will need $1.5 million at…

A:

Q: Suppose you have a project that has a 0.6 chance of doubling your investment in a year and a 0.4…

A: Standard deviation is computed by following formula-Standard deviation =

Q: would be in the 24% federal marginal tax bracket. How much will she pay in income taxes on the…

A: ROTH IRA are retirement plan in which amount of deposit are done after paying adequate taxes and…

Q: Flatte Restaurant is considering the purchase of a $10,800 soufflé maker. The soufflé maker has an…

A: NPV is also known as Net Present Value.. It is a capital budgeting technique which helps in decision…

Q: You expect a stock to pay dividends of $0.80, $1.20, $1.85, $2.00 over the next 4 years. You will…

A: The price of a stock is the sum of the present value of future dividends.

Q: Rotweiler Obedience School's December 31, 2018, balance sheet showed net fixed assets of $1,750,000,…

A: In this question, we are required to determine the net capital spending for 2019.

Q: -A For the following stable growth firm, calculate: Cost of equity using CAPM, having risk…

A: Cost of equity is the required rate of shareholders and it depends on the risk free rate,market risk…

Q: Security A B C Beta 0.8 1.0 1.2 Expected Return 10% 12% 14% Residual standard deviation 25% 10% 20%…

A: According to Single Index model , Variance of stock is calculated as follows:-Variance of stock =…

Q: Suppose you borrowed $15,000 at a rate of 8.5% and must repay it in 5 equal installments at the end…

A: Loan installment is that which is paid by borrower to lender for a specified period of time. This…

Q: The current spot exchange rate is $1.25/€ and the three-month forward rate is \$ 1.3 / epsilon .…

A: S0: $1.25/€Forward rate: $1.3/€Investment value: €125,000Strike price: $1.2/€Option premium:…

Q: Suppose you have a portfolio that has $290 in stock A with a beta of 1.04, $1, 160 in stock B with a…

A: Beta of portfolio is computed as follows:-Bp = (Ba*Wa)+(Bb*Wb)+(Br*Wr)+(Bs*Ws)whereBp =beta of…

Q: JRN Enterprises just announced that it plans to cut its next-year dividend, D₁, from $2.25 to $1.30…

A: Price of a stock is the present value of the dividend and the growth of the dividend is based on the…

Q: Better Mousetraps has developed a new trap. It can go into production for an initial investment in…

A: Inventory control is a process where the company manages the stock (product) of the company in an…

Q: Michelle, age 54, it's self-employed and has never made a lot of money. But, she is consistently…

A: Contribution made to IRA account is tax free and hence deposit made are quite useful in retirement…

Q: A new oven will save $120 per year in electricity expense. How much can we afford to pay for this…

A: Present Value is the current price of future value which will be received in near future at some…

Q: Which coverage under the Ontario Auto Policy (OAP 1) applies to the damage to the vehicle in not at…

A: OAP 1 policy- It sets out the detailed rights and obligations of both the insured and their…

Q: A corporation recently purchased some preferred stock that has a before-tax yield of 10.00%. The…

A: Before-tax dividend yield = 10.00%50% dividend exclusion for taxes on dividends. This means that…

Q: You are considering a 30-year, $1,000 par value bond. Its coupon rate is 11%, and interest is paid…

A: A bond refers to an instrument that is used to raise debt capital for the issuing company from…

Q: Question An amount of $14951 is deposited into a fund that earns a nominal annual rate of interest…

A: Future value refers to the compounded value of all cash flows till the maturity at a given interest…

Q: If the stock price is $34.06, what required return must investors be demanding on the company's…

A: The constant growth model is a stock valuation method used in finance to determine a stock's…

Q: Suppose the real rate is 1%, the risk-free rate is 4%, maturity risk premium is 2%, inflation…

A: Here,Real rate is 1%Risk Free Rate is 4%Maturity Risk Premium is 2%Inflation Premium is 3%Default…

Q: ir is considering Projects S and L, whose cash flows are shown below. These projects are atually…

A: Businesses generally employ the net present value and internal rate of return approaches to assess…

Q: A couple wishes to borrow money using the equity in their home for collateral. A loan company will…

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

Q: What is the dirty price of a 9-year bond with a 3.11 percent annual coupon, and a yield to maturity…

A: The price that is computed after adding up the clean price of the bond along with the interest that…

Q: A corporation recently purchased some preferred stock that has a before-tax yield of 10.00%. The…

A: After Tax return on preferred stock= Preferred Dividend rate * (1- (1-Dividend exclusion %)*Tax…