Gitman: Principl Manageri Finance_15 (15th Edition) (What's New in Finance)
15th Edition
ISBN: 9780134476315
Author: Chad J. Zutter, Scott B. Smart
Publisher: PEARSON
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Question
Chapter 8, Problem 8.1P
a)
Summary Introduction
To discuss:
Introduction:
Return: In financial context, return is seen as percentage that represents the profit in an investment.
b)
Summary Introduction
To discuss:
Recommended investment.
Introduction:
Return: In financial context, return is seen as percentage that represents the profit in an investment.
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Issue #11: Comparison of Returns on $200000 and 5.5% on$70,000
Investors, as reasonable economic creatures commit toinvestment portfolios with the expectation of earning valuable returns. Keon as a logical investor believes his investment should provide the best value of rewards and is considering which option to invest in. The expected returns should be something similar or equal to his historical gain of 9% per annum.
If Keon should leave $70,000 in the safe investment , his only expected return will be $3,850 (70,000*5.5%) in nominal terms per annum.
However, if he invests the $200,000 by going entrepreneurial, Keon can potentially make a significant gain as per below.
Return on Investment (ROI)
ROI = Net Income * 100 Cost of Investment
Cost of investment = $200, 000
Cost of 1 Limousine = 80,000
Total Cost of Limousines = (80,000*4) = 320,000
Useful Life of 1 Limousine = 20 yrs
Depreciation per year = 80,000 = 4,000 20…
multiple choice
3. A financial manager must choose between three alternative investments. Each asset is expected to provide earnings over a three-year period as described below. Based on the wealth maximization goal, the financial manager would choose (Justify your answer)
Year Asset X Asset Y Asset Z1 $15,000 $ 4,000 $ 6,0002 $9,000 $10,000 $14,0003 $5,000 $15,000 $11,000 $29,000 $29,000 $31,000
(a) Asset X.(b) Asset Y.(c) Asset Z.(d) Be indifferent between Asset X and Asset Y
QUESTION 2 One of the reports submitted by the infrastructure development team revealed the following
Year 0 1 2 3 4
Cashflows A -R 210000 ,R15000 ,R 30000 , R 30 000 ,R 370000
Cashflow B -R 21000 , R11000 ,R 9000, R11000, R 9000
Suppose you require a 15 per cent return on investment.
2.1 Using the discounted payback period which investment would you choose and why?
2.2 If you apply the NPV rule which investment, will you choose and why?
2.3 Based on the provided answers which project would you finally choose and why?
All parts correctly pls with explanation thanks!
Chapter 8 Solutions
Gitman: Principl Manageri Finance_15 (15th Edition) (What's New in Finance)
Ch. 8.1 - What is risk in the context of financial decision...Ch. 8.1 - Prob. 8.2RQCh. 8.1 - Compare the following risk preferences: (a) risk...Ch. 8.2 - Explain how the range is used in scenario...Ch. 8.2 - Prob. 8.5RQCh. 8.2 - Prob. 8.6RQCh. 8.2 - What does the coefficient of variation reveal...Ch. 8.3 - What is an efficient portfolio? How can the return...Ch. 8.3 - Prob. 8.9RQCh. 8.3 - How does international diversification enhance...
Ch. 8.4 - Prob. 8.11RQCh. 8.4 - Prob. 8.12RQCh. 8.4 - Prob. 8.13RQCh. 8.4 - What impact would the following changes have on...Ch. 8 - Prob. 1ORCh. 8 - Prob. 8.1STPCh. 8 - Prob. 8.2STPCh. 8 - Prob. 8.1WUECh. 8 - Prob. 8.2WUECh. 8 - Prob. 8.3WUECh. 8 - Prob. 8.4WUECh. 8 - Prob. 8.5WUECh. 8 - Prob. 8.6WUECh. 8 - Prob. 8.1PCh. 8 - Prob. 8.2PCh. 8 - Prob. 8.3PCh. 8 - Prob. 8.4PCh. 8 - Prob. 8.5PCh. 8 - Learning Goal 2 P8-6 Bar charts and risk Swans...Ch. 8 - Prob. 8.7PCh. 8 - Prob. 8.8PCh. 8 - Prob. 8.9PCh. 8 - Prob. 8.10PCh. 8 - Prob. 8.11PCh. 8 - Prob. 8.12PCh. 8 - Prob. 8.13PCh. 8 - Prob. 8.14PCh. 8 - Learning Goal 4 P8- 15 Correlation, risk, and...Ch. 8 - Prob. 8.16PCh. 8 - Learning Goal 5 P8- 17 Total, nondiversifiable,...Ch. 8 - Prob. 8.18PCh. 8 - Prob. 8.19PCh. 8 - Prob. 8.20PCh. 8 - Prob. 8.21PCh. 8 - Prob. 8.22PCh. 8 - Prob. 8.23PCh. 8 - Prob. 8.24PCh. 8 - Prob. 8.25PCh. 8 - Prob. 8.26PCh. 8 - Prob. 8.27PCh. 8 - Learning Goal 6 P8- 28 Security market line (SML)...Ch. 8 - Prob. 8.29PCh. 8 - Prob. 8.30PCh. 8 - Prob. 8.31PCh. 8 - Spreadsheet Exercise Jane is considering investing...
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