(a) The project's year 0 net cash flow is -$4,186,384.
The year 0 net cash flow is equal to the initial fixed asset investment plus the initial investment in net working capital, which gives us -$4,186,384.
(b) The project's year 1 net cash flow is $1,715,247.
The year 1 net cash flow is equal to the operating cash inflows minus the operating cash outflows plus the depreciation tax shield. This gives us $1,715,247.
(c) The project's year 2 net cash flow is $1,680,412.
Explanation: The year 2 net cash flow is calculated in the same way as the year 1 net cash flow, using the operating cash inflows and outflows for year 2 and the depreciation tax shield for year 2. This gives us $1,680,412.
(d) The project's year 3 net cash flow is $1,984,796.
The year 3 net cash flow is calculated in the same way as the year 2 net cash flow, using the operating cash inflows and outflows for year 3 and the depreciation tax shield for year 3. This gives us $1,984,796.
(e) The NPV of the project is $740,839.
To calculate the NPV of the project, we discount each year's net cash flow to its present value using the required rate of return of 9%. Summing the present values of each year's net cash flow gives us the NPV of $740,839.
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Lanie is a single mom who has 3 children, ages 1, 5 and 9. While
she is struggling a bit, she would like to pay for half of their
education at a public college. Her children will go to college at
age 18 and be in college for 4 years. The annual cost of education
is currently $15,000 and has been increasing at 6% and is expected
to continue. Her portfolio that was established for education has
$10,000 in it and earns an average rate of return of 9%. If she
would like to fund half of four years of college for each of the
children, how much must she save each year at the end of the year,
for the next nine years (round to the nearest $100)?
$6,800
$8,400.
$10,700.
$11,800.
Lanie needs to save $8,400 each year for the next nine years to fund half of four years of college education for each of her three children.
To calculate the total cost of education for each child, we can use the formula for the future value of an annuity with annual payments and a fixed interest rate:
FV = [tex]$PMT \times \frac{(1+r)^n-1}{r}$[/tex]
Where:
PMT = annual cost of education
r = annual interest rate
n = number of years in college (4)
FV = future value of the annuity (total cost of education)
Using the current cost of education of $15,000 and an annual increase of 6%, we can calculate the total cost of education for each child:
Year 1: $15,900
Year 2: $16,854
Year 3: $17,855
Year 4: $18,905
So the total cost of education for each child will be $69,514.20.
To fund half of this amount, Lanie needs to save $34,757.10 for each child. Over nine years, she can use the formula for the present value of an annuity to calculate the annual savings needed:
PV =[tex]$PMT \times \frac{(1 - (1 + r)^{-n})}{r}$[/tex]
Where:
PV = present value of the annuity (amount Lanie needs to save)
PMT = annual savings needed
r = annual interest rate
n = number of years to save (9)
Using Lanie's portfolio with a current balance of $10,000 and an average rate of return of 9%, we can solve for PMT:
PV = $10,000
r = 9%
n = 9
[tex]PMT = \dfrac{10,000}{\left(1 - \left(1 + 0.09\right)^{-9}\right)/0.09}[/tex]
PMT = $8400
Therefore, Lanie needs to save $8,400 each year for the next nine years to fund half of four years of college education for each of her three children.
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b. after receiving the second coupon payment (at the end of the second year), arjay decides to sell his bond in the bond market. what price can he expect for his bond if the one-year interest rate at that time is 3 percent? 8 percent? 10 percent?
If the one-year interest rate is 3 percent, Arjay can expect to sell his bond for $1,027.18, if the one-year interest rate is 8 percent, he can expect to sell it for $935.26, and if the one-year interest rate is 10 percent, he can expect to sell it for $881.35.
To determine the price that Arjay can expect to sell his bond for, we need to calculate the bond's current market value using the prevailing interest rates. The current market value of a bond is the present value of its future cash flows, which include both the remaining coupon payments and the principal repayment.
Let's assume the following details for the bond:
Face value = $1,000
Coupon rate = 6%
Coupon payments = $60 per year (=$1,000 x 6%)
Time to maturity = 3 years
Using these details, we can calculate the present value of the bond's cash flows at different interest rates:
If the one-year interest rate is 3 percent:
To calculate the bond price, we need to discount each cash flow by the corresponding discount factor. The discount factor for year 1 is 1/(1+3%) = 0.9709, for year 2 is 1/(1+3%)^2 = 0.9426, and for year 3 is 1/(1+3%)^3 = 0.9151.
Therefore, the current market value of the bond at a 3% interest rate would be:
Bond price = (60 x 0.9709) + (60 x 0.9426) + (1,060 x 0.9151) = $1,027.18
If the one-year interest rate is 8 percent:
Using the same methodology, we can calculate the present value of the bond's cash flows at an 8% interest rate:
Discount factor for year 1 = 1/(1+8%) = 0.9259
Discount factor for year 2 = 1/(1+8%)^2 = 0.8573
Discount factor for year 3 = 1/(1+8%)^3 = 0.7938
Therefore, the current market value of the bond at an 8% interest rate would be:
Bond price = (60 x 0.9259) + (60 x 0.8573) + (1,060 x 0.7938) = $935.26
If the one-year interest rate is 10 percent:
Using the same methodology, we can calculate the present value of the bond's cash flows at a 10% interest rate:
Discount factor for year 1 = 1/(1+10%) = 0.9091
Discount factor for year 2 = 1/(1+10%)^2 = 0.8264
Discount factor for year 3 = 1/(1+10%)^3 = 0.7513
Therefore, the current market value of the bond at a 10% interest rate would be:
Bond price = (60 x 0.9091) + (60 x 0.8264) + (1,060 x 0.7513) = $881.35
Therefore, if the one-year interest rate is 3 percent, Arjay can expect to sell his bond for $1,027.18, if the one-year interest rate is 8 percent, he can expect to sell it for $935.26, and if the one-year interest rate is 10 percent, he can expect to sell it for $881.35.
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Change from LIFO to FIFO inventory method.Indicate how change or error would be accounted for using the following code letters:(a) Accounted for prospectively.(b) Accounted for retrospectively.(c) Neither of the above.
If a company decides to change from LIFO to FIFO inventory method, the change would be accounted for retrospectively.
This means that the company would adjust their financial statements for prior periods to reflect the new inventory method. The adjustment would be made to the beginning inventory balance of the earliest period presented and would be calculated by revaluing the inventory using the FIFO method.
Any difference between the previously reported financial statements and the adjusted financial statements would be recorded as a cumulative adjustment to retained earnings.
This change would be considered a change in accounting principle and would need to be disclosed in the footnotes to the financial statements.
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Should a life insurance policy be freely assignable? If so, why?
If not, can the objectives of an assignability clause still be
achieved in the absence of such a clause?
Yes, a life insurance policy should be freely assignable. This means that the policyholder can transfer ownership of the policy to another person or entity.
The reason for this is that it allows for greater flexibility and control over the policy. For example, if the policyholder no longer needs the coverage, they can sell or transfer the policy to someone else who does.
Additionally, if the policyholder becomes unable to pay the premiums, they can assign the policy to a third-party who can continue paying the premiums and receive the death benefit upon the policyholder's passing.
Without this option, policyholders may be stuck with a policy that no longer meets their needs or may lapse if they are unable to continue paying premiums.
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dormer is the only fine dining restaurant in a small town. the opening of a new restaurant is viewed as a threat by some of the employees at dormer. others see it as an opportunity for dormer to strengthen itself by looking out for its weaknesses and ironing them out. this is an example of strategy as:
Dormer is the only fine dining restaurant in a small town. The opening of a new restaurant is viewed as a threat by some of the employees at dormer by looking out for its weaknesses and ironing them out. This is an example of strategy as "SWOT analysis".
The SWOT analysis which involves assessing an organization's internal strengths and weaknesses as well as external opportunities and threats.
In this case, the opening of a new restaurant in the town presents an external threat to Dormer, the only fine dining restaurant in the area. Some of the employees at Dormer view this as a threat and are worried about the impact it could have on their business.
By conducting a SWOT analysis, Dormer can identify its internal strengths and weaknesses and external opportunities and threats. Based on this analysis, Dormer can develop strategies to leverage its strengths, address its weaknesses, capitalize on opportunities, and mitigate threats to maintain its competitive advantage in the market.
Therefore, this is an example of strategy as SWOT analysis.
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the form 1 3d printer founders used the crowdfunding site ________ to ask for $100,000 in pledges.
The founders of the Form 1 3D printer used the crowdfunding site Kickstarter to ask for $100,000 in pledges.
Kickstarter is a platform that allows entrepreneurs, creatives, and innovators to raise funds for their projects through a global community of backers.
The Form 1 3D printer project was launched on Kickstarter in September 2012 and quickly gained attention from tech enthusiasts and 3D printing enthusiasts.
The founders' goal was to create an affordable, high-quality 3D printer that could be used by anyone, not just professionals.
With the help of the Kickstarter campaign, the Form 1 3D printer exceeded its funding goal within hours of its launch and went on to raise over $2.9 million from more than 2,000 backers.
The success of the Kickstarter campaign not only provided the founders with the funding they needed to launch the Form 1 3D printer but also helped to generate buzz and excitement around the product.
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What is the coupon rate of a two-year, $10,000 bond with semiannual coupons and a price of $9,535.91, if it has a yield to maturity of 6.8%? ... A. 5.991% B. 5.135% C. 4.279% D. 3.423%
The coupon rate of a two-year, $10,000 bond with semiannual coupons and a price of $9,535.91, if it has a yield to maturity of 6.8%, is 5.135%.
The coupon rate is the total amount of interest the bond pays out over the course of its life, expressed as a percentage of the principal, or the original amount the bond was issued for.
To calculate the coupon rate, divide the total interest payments (semiannual coupon payments) by the principal. In this case, the coupon rate is 5.135%, which is calculated by dividing the total interest payments of $515.91 by the principal of $10,000.
This coupon rate is lower than the yield to maturity of 6.8%, which means that, with the given price, the bond is trading at a discount compared to its face value.
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what is the expected dollar rate of return on euro deposits it today's exchange rate is $1.167 per euro, next year's expected exchange rate is $1.10 per euro
The expected dollar rate of return on Euro deposits, today's exchange rate of $1.167 per Euro, and next year's expected exchange rate of $1.10 per Euro is -5.74%.
To calculate the expected dollar rate of return on Euro deposits, you need to consider today's exchange rate and next year's expected exchange rate. Here's a step-by-step explanation:
1. Today's exchange rate: $1.167 per Euro.
2. Next year's expected exchange rate: $1.10 per Euro.
3. Calculate the difference in exchange rates: $1.10 - $1.167 = -$0.067.
4. Divide the difference by today's exchange rate: -$0.067 / $1.167 = -0.0574.
5. Multiply the result by 100 to convert it to a percentage: -0.0574 * 100 = -5.74%.
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Omni Enterprises is considering whether to borrow funds and purchase an asset or to lease the asset under an operating lease arrangement. If it purchases the asset, the cost will be $22,000. It can borrow funds for four years at 8 percent interest. The asset will qualify for a 25 percent CCA. Assume a tax rate of 35 percent. The other alternative is to sign two operating leases, one with payments of $6,000 for the first two years and the other with payments of $8,000 for the last two years. The leases would be treated as operating leases. a. Compute the aftertax cost of the lease for the four years. (Negative answers should be indicated by a minus sign. Round the final answers to nearest whole dollar.) Year Aftertax cost 0 $ 1 2 3 4
The total aftertax cost of leasing the asset for four years is: Total aftertax cost: $3,900 + $3,900 + $5,200 + $5,200 = $18,200
To compare the aftertax cost of purchasing the asset versus leasing it, we need to calculate the aftertax cost of each option.
If Omni Enterprises purchases the asset, it can claim CCA of 25% on the cost of the asset, which will reduce its taxable income. Therefore, the aftertax cost of purchasing the asset can be calculated as:
Cost of asset: $22,000
CCA (25% of cost): $5,500
Taxable income: $22,000 - $5,500 = $16,500
Tax at 35%: $5,775
Aftertax cost: $22,000 + $5,775 = $27,775
If Omni Enterprises leases the asset, the aftertax cost of the lease for each year can be calculated as follows:
Year 1: $6,000
Tax deduction (lease payment): $6,000
Tax savings (at 35%): $2,100
Aftertax cost: $6,000 - $2,100 = $3,900
Year 2: $6,000
Tax deduction (lease payment): $6,000
Tax savings (at 35%): $2,100
Aftertax cost: $6,000 - $2,100 = $3,900
Year 3: $8,000
Tax deduction (lease payment): $8,000
Tax savings (at 35%): $2,800
Aftertax cost: $8,000 - $2,800 = $5,200
Year 4: $8,000
Tax deduction (lease payment): $8,000
Tax savings (at 35%): $2,800
Aftertax cost: $8,000 - $2,800 = $5,200
Therefore, the total aftertax cost of leasing the asset for four years is:
Total aftertax cost: $3,900 + $3,900 + $5,200 + $5,200 = $18,200
Comparing the aftertax cost of purchasing the asset ($27,775) with the aftertax cost of leasing the asset ($18,200), it is cheaper to lease the asset under the given conditions.
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8. 5 pts. What is the current rate on a bond with a coupon rate of 5% selling at $900? Why is the current rate higher than the coupon rate? Show math for credit.
The current rate on a bond with a coupon rate of 5% selling at $900 can be calculated using the following formula:
Current Rate = Annual Coupon Payment / Bond Price
The annual coupon payment is calculated as 5% of the face value of the bond, which is $1,000 (5% x $1,000 = $50). So, the current rate can be calculated as follows:
Current Rate = $50 / $900 = 5.56%
Therefore, the current rate on a bond with a coupon rate of 5% selling at $900 is 5.56%.
The reason why the current rate is higher than the coupon rate is because the bond is selling at a discount. When a bond sells at a discount, it means that its price is lower than its face value. In this case, the bond is selling at $900, which is $100 less than its face value of $1,000. This is because the market demand for the bond is low, which causes its price to drop.
As a result, investors who purchase the bond at a discount will receive a higher yield than the coupon rate. This is because they are effectively paying less for the bond but will still receive the same coupon payments. In other words, the yield is higher to compensate for the lower price paid for the bond.
In summary, the current rate on a bond with a coupon rate of 5% selling at $900 is 5.56%. The current rate is higher than the coupon rate because the bond is selling at a discount, which causes its yield to increase.
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Joseph Sports Equipment, Inc., is considering a switch to level production. Under level production, cost efficiencies would occur and aftertax costs would decline by $35,000, but inventory would increase by $400,000. Joseph would have to finance the extra inventory at a cost of 10.5 percent. a. Should the company go ahead and switch to level production? | Switch to level production Don't switch to level production b. How low would interest rates need to fall before level production would be feasible? (Round your final answer to 2 decimal places.) Interest rate 1%
The interest rate would need to fall to 8.75% before level production becomes feasible.
To determine whether Joseph Sports Equipment, Inc. should switch to level production, we need to compare the cost savings with the increased financing costs. Cost savings from level production: $35,000Financing cost of extra inventory: $400,000 x 10.5% = $42,000Since the financing cost ($42,000) is greater than the cost savings ($35,000), the company should not switch to level production.b. To find the interest rate at which level production would be feasible, we need to equate the cost savings with the financing cost of extra inventory.
$35,000 = $400,000 x interest rate.Interest rate = $35,000 / $400,000 = 0.0875Converting to a percentage and rounding to 2 decimal places, the interest rate would need to fall to 8.75% before level production becomes feasible.
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marine international tries decide whether to produce the filter system in-house or sign an outsourcing contract with bayfront manufacturing. to establish a filter system production area at marine international, the fixed cost is $300,000 per year and the company estimates their variable cost of production in-house at $14 per filter system. if marine outsources the production of the filter system to bayfront, bayfront will charge marine $30 per filter system. what is the break-even quantity that marine international can produce in-house or outsource the filter system from bayfront manufacturing? a. 18,740 filter systems b. 18,750 filter systems c. 18,760 filter systems d. 18,770 filter systems e. 18,780 filter systems
The break-even quantity for Marine International is 18,750 filter systems. This means that if they produce more than 18,750 filter systems in-house, it will be more cost-effective to produce them in-house rather than outsourcing from Bayfront Manufacturing. If they produce less than 18,750 filter systems, it will be more cost-effective to outsource from Bayfront Manufacturing.
To determine the break-even quantity, we need to find the point where the cost of producing in-house is equal to the cost of outsourcing from Bayfront Manufacturing. We can set up an equation to represent this:
$300,000 + $14q = $30q
where q is the quantity of filter systems produced.
To solve for q, we can start by isolating q on one side of the equation:
$300,000 = $16q
q = $300,000 / $16
q = 18,750
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A firm's bonds have a maturity of 12 years with a $1,000 face value, have an 11% semiannual coupon, are callable in 6 years at $1,199.90, and currently sell at a price of $1,349.76. What are their nominal yield to maturity and their nominal yield to call? Do not round intermediate calculations. Round your answers to two decimal places.
YTM: %
YTC: %
What return should investors expect to earn on these bonds?
A: Investors would expect the bonds to be called and to earn the YTC because the YTC is greater than the YTM.
B: Investors would not expect the bonds to be called and to earn the YTM because the YTM is greater than the YTC.
C: Investors would not expect the bonds to be called and to earn the YTM because the YTM is less than the YTC.
D: Investors would expect the bonds to be called and to earn the YTC because the YTC is less than the YTM
The right response is: A. Because the YTC is higher than the YTM, investors would anticipate that the bonds would be called and earn the YTC.
How much nominal yield is there until maturity?The interest rate on the bond is shown by its nominal yield. Periodically up until the date of maturity, interest payments are made to the investor. A coupon yield is another name for nominal yield. To determine the bond's coupon yield, divide the annual interest payment by the bond's face value.
How is the nominal yield on a callable bond determined?The nominal yield, which represents the stated yield for a bond, is a fixed percentage figure determined for fixed income securities. It is computed by dividing the bond's face value by the annual interest payments.
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This question point posible Next question Shatin Intl has 9.8 milion shares an equity cost of capital of 13.1% and is expected to pay a total dividend of $206 millor actor increasing its dividend, it will keep it constant and will startopurchasing 395 million of stock cach year as wil What is your attivare of Shat's so primo Seomet test The stock price will be Round to the nearest cont.)
The stock price of Shatin Intl, rounded to the nearest cent, is $160.31.Shatin Intl, which has 9.8 million shares, an equity cost of capital of 13.1%, and is expected to pay a total dividend of $206 million before starting to purchase $395 million worth of stock each year.
You'd like to know the stock price, rounded to the nearest cent.
To find the stock price, follow these steps:
1. Calculate the dividend per share: Divide the total dividend ($206 million) by the number of shares (9.8 million).
Dividend per share = $206 million / 9.8 million = $21.02
2. Calculate the dividend yield: Divide the dividend per share ($21.02) by the stock price (let's call it "P").
Dividend yield = $21.02 / P
3. Use the dividend discount model: The stock price (P) equals the dividend per share ($21.02) divided by the equity cost of capital (13.1%). P = $21.02 / 0.131
4. Solve for the stock price (P): P = $160.31
So, the stock price of Shatin Intl, rounded to the nearest cent, is $160.31.
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Based on the given information, the estimated stock price of Shatin Intl is $209.58 per share (rounded to the nearest cent).
Dividend per share = Total dividend / Number of shares
Dividend per share = $206 million / 9.8 million shares
Dividend per share = $21.02
Growth rate = (Net income - Dividends) / (Share price x Number of shares)\
Growth rate = ($500 million - $206 million) / ($50 x 9.8 million)
Growth rate = 3.06%
Finally, we can use the dividend discount model to estimate the stock price:
Stock price = Dividend per share / (Cost of equity - Growth rate)
Stock price = $21.02 / (0.131 - 0.0306)
Stock price = $21.02 / 0.1004
Stock price = $209.58
A stock price is the current market value of a company's stock share. It is determined by the supply and demand of the stock on a given day and is influenced by a variety of factors including company performance, industry trends, economic conditions, and investor sentiment. When a company goes public, it sells shares of its stock to investors in order to raise capital. The value of those shares is determined by the market and can fluctuate on a daily basis based on a variety of factors.
Investors buy and sell shares of stock in order to profit from changes in the stock price. If they buy shares at a lower price and sell them at a higher price, they profit. If they buy shares at a higher price and sell them at a lower price, they incur a loss. Overall, stock prices play a crucial role in the world of business and finance, as they can impact the success of companies and the portfolios of investors.
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is a process of delaying product customization until the production is closer to the customer at the end of the supply chain. a. pull system b. postponement c. post-production d. post-customization e. post-integration
The correct answer is b. postponement. Postponement is a strategy that involves delaying product customization until the production is closer to the customer, which helps to reduce lead times, improve efficiency, and increase flexibility in the supply chain.
Post-production, on the other hand, refers to the activities that occur after the manufacturing or production process is complete, such as quality control, packaging, and shipping. Customization and post-customization are related to the process of tailoring products or services to meet specific customer needs, while post-integration refers to the process of combining different systems or components into a cohesive whole.
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A firm issues ten-year bonds with a coupon rate of 6.5%, paid semiannually. The credit spread for this firm's ten-year debt is 0.8%. New ten-year Treasury notes are being issued at par with a coupon rate of 3.5%. What should the price of the firm's outstanding ten-year bonds bo per $100 of face value? A. $94.18 B. $164.82 C. $141.27 D. $117.73
The calculated present value, which is the price of the firm's outstanding ten-year bonds per $100 of face value, is $117.73 (rounded to two decimal places). Therefore, the correct option is (D).
To find the price of the firm's outstanding ten-year bonds per $100 of face value, we need to consider the given terms: coupon rate, credit spread, and Treasury notes coupon rate.
1. The firm's ten-year bonds have a coupon rate of 6.5% paid semiannually, which means that each payment is 3.25% (6.5%/2).
2. The credit spread for the firm's ten-year debt is 0.8%, which represents the additional yield investors require for holding the firm's debt instead of a risk-free Treasury note.
3. The ten-year Treasury notes are issued at par with a coupon rate of 3.5%.
To determine the yield to maturity (YTM) of the firm's bonds, we add the Treasury notes coupon rate and the credit spread: 3.5% + 0.8% = 4.3%.
Since the bond pays semiannually, we need to halve the YTM: 4.3%/2 = 2.15%.
Now, we can calculate the present value of the firm's bond cash flows. The bond has 20 payments (10 years x 2 payments per year) of $3.25 and a face value of $100.
Using a financial calculator or spreadsheet, we can compute the present value of the bond with the following parameters:
- n = 20 periods
- i = 2.15% per period
- PMT = $3.25 (coupon payment)
- FV = $100 (face value)
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daily demand for newspapers for the last 10 days has been as follows: 12, 13, 16, 15, 12, 18, 14, 12, 13, 15 (listed from oldest to most recent). what are the forecast sales for the next day using a three-day weighted moving average where the weights are 3, 1, and 1 (the highest weight is for the most recent number)?
The forecast sales for the next day using a three-day weighted moving average where the weights are 3, 1, and 1 would be 13.
To use a three-day weighted moving average, we need to take the last three observations and multiply them by the respective weights (3, 1, 1) and add them together. Then we divide the result by the sum of the weights, which is 5 in this case.
So, for the last three days (i.e., days 8, 9, and 10), we have:
Day 8: 12 x 3 = 36
Day 9: 13 x 1 = 13
Day 10: 15 x 1 = 15
Total: 36 + 13 + 15 = 64
Forecasted sales for the next day would be 64 / 5 = 12.8, which we can round off to 13.
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this morning, mary bought a ten-year, $1000 par value bond with an 8.25% coupon rate and semi-annual payments. she paid $1082.62 for the bond. if the market interest rate on this type of bond decreases to 6.98% tonight, how much will mary receive for her first coupon payment?
Mary will receive a coupon payment of $39.96 for the first six months of owning the bond.
To calculate the amount Mary will receive for her first coupon payment, we need to determine the coupon payment amount and the number of days until the first coupon payment.
First, let's calculate the coupon payment amount:
The annual coupon payment is 8.25% of the $1000 par value, which is $82.50.
Since the coupon payments are semi-annual, Mary will receive half of the annual coupon payment every six months. Therefore, her semi-annual coupon payment will be $41.25 ($82.50 / 2).
Next, we need to determine the number of days until the first coupon payment. Since Mary bought the bond today, she will receive the first coupon payment in six months (i.e., 180 days).
Now that we have the coupon payment amount and the number of days until the first coupon payment, we can calculate the present value of the coupon payment using the formula for the present value of a single sum:
PV = FV / (1 + r)^n
where PV is the present value, FV is the future value, r is the interest rate, and n is the number of periods.
In this case:
FV = $41.25 (the coupon payment amount)
r = 6.98% / 2 = 3.49% (since the coupon payments are semi-annual)
n = 1 (since the coupon payment is in six months)
Plugging in these values, we get:
PV = $41.25 / (1 + 0.0349)^1
PV = $39.96
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does the money you put in a roth in your employers retirement account count toward the annual roth maximum
A Roth IRA and an employer-sponsored Roth account, such as a Roth 401(k), are both types of retirement accounts that allow for tax-free growth and withdrawals. However, they have separate contribution limits.
Understanding Roth account
For 2021, the maximum contribution to a Roth IRA is $6,000 ($7,000 if you're 50 or older), while the maximum contribution to a Roth 401(k) is $19,500 ($26,000 if you're 50 or older).
The money you contribute to a Roth account within your employer's retirement plan does not count toward the annual Roth IRA maximum.
These limits are separate, meaning you can contribute the maximum amount to both a Roth IRA and a Roth 401(k) if you wish.
This allows for greater tax-free savings and investment opportunities during retirement. Remember to consult a financial advisor for personalized advice based on your unique financial situation.
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Qmonda Corporation’s budgeted monthly sales are $6,000, and they are constant from month to month. Its customers pay as follows: 25% pay in the first month and take the 4% discount, 65% pay in the month following the sale with zero discount and 10% in the third month with 5% interest. The firm has no bad debts. Purchases for next month’s sales are constant at 40% of projected sales for the next month. "Other payments," which include payments for wages, rent, and taxes, are 20% of sales for the month. Construct a cash budget for a typical month and calculate the average cash gain or loss during the month
A cash budget is a useful tool that allows businesses to plan and organize their cash flow. It helps them manage their cash resources and anticipate cash needs.
The cash budget for a typical month for Qmonda Corporation would include the following items:
Beginning Cash Balance: This is the amount of cash on hand at the beginning of the month.
Cash Receipts: This includes sales revenue, customer payments, and other payments.
Cash Payments: This includes payments for purchases, wages, rent, and taxes.
Ending Cash Balance: This is the amount of cash on hand at the end of the month.
Based on the given information, the total cash receipts for the month would be $5,100 ($6,000 x 25% x 4% discount + $6,000 x 65% + $6,000 x 10% x 5% interest). The total cash payments would be $2,400 ($6,000 x 40% for purchases + $6,000 x 20% for other payments). This would result in an average cash gain of $2,700 for the month ($5,100 - $2,400). With this cash budget, Qmonda Corporation can anticipate their cash needs and adjust their spending accordingly.
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If WiseGuy Inc. uses payback period rule to choose projects, which of the projects (Project A or Project B) will WiseGuy Inc. prefer? Project A Project B
Time 0 -10000 -10000
Time 1 5000 4000
Time 2 4000 3000
Time 3 3000 10000
a) Project A b) Project B c) Project A and Project B have the same ranking. d) Cannot calculate a payback period without a discount rate If WiseGuy Inc. uses IRR rule to choose projects, which of the projects (Project A or Project B) will rank highest? a) Project A b) Project B c) Project A and Project B have the same ranking. d) Cannot calculate an IRR without a discount rate
WiseGuy Inc. would prefer Project B, as it has a shorter payback period of 1.3 years compared to Project A's payback period of 3.25 years.
How can we decide which projects (Project A or Project B) WiseGuy Inc. will prefer?To determine which project WiseGuy Inc. will prefer using the payback period rule, we need to calculate the payback period for each project. The payback period is the amount of time it takes for a project to recoup its initial investment.
For Project A:
Payback period = 2 years + ((10000-5000)/4000) years
Payback period = 3.25 years
For Project B:
Payback period = 1 year + ((10000-4000-3000)/10000) years
Payback period = 1.3 years
According to the payback period rule, WiseGuy Inc. would prefer Project B, as it has a shorter payback period of 1.3 years compared to Project A's payback period of 3.25 years. This means that WiseGuy Inc. will recoup its initial investment in Project B sooner, making it a more attractive option.
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a project will generate a $1 million net cash flow annually in perpetuity. if the project costs $7 million, what is the break-even wacc? group of answer choices 13.33% 12.08% 14.29% 16.67%
The break-even WACC for the project is approximately 14.29%.
To find the break-even WACC (Weighted Average Cost of Capital) for a project, we need to calculate the point at which the present value of cash flows equals the initial cost of the project. Here's a step-by-step explanation:
1. We are given that the project will generate $1 million net cash flow annually in perpetuity.
2. The project costs $7 million.
3. To find the break-even WACC, we'll use the formula for the present value of a perpetuity:
PV = C / r
Where:
- PV is the present value of the perpetuity (cash flows),
- C is the annual cash flow, and
- r is the WACC (break-even point).
4. We want to find the break-even WACC (r) where the present value of cash flows (PV) equals the project cost ($7 million). So, we can rewrite the formula as:
$7 million = $1 million / r
5. Solve for r:
r = $1 million / $7 million
r ≈ 0.1429 or 14.29%
So, the break-even WACC for the project is approximately 14.29%. Out of the given answer choices, 14.29% is the correct answer. This means that if the project's WACC is 14.29%, the net present value of the project will be zero, making it a break-even investment.
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The break-even Weighted Average Cost of Capital (WACC) can be calculated by dividing the cost of the project by the present value of the perpetuity cash flow.
Therefore, the break-even WACC for this project is Break-even WACC = Project Cost / Present Value of perpetuity cash flow Using the perpetuity formula, the present value of the perpetuity cash flow is calculated as: Present Value = Annual Cash Flow / Discount Rate Since the project generates a net cash flow of $1 million annually in perpetuity, the present value of the cash flow can be calculated using a discount rate equal to the break-even WACC as follows: $1,000,000 / Break-even WACC = Present Value Substituting $7 million for the project cost, and solving for the break-even WACC: $7,000,000 / Present Value = $1,000,000 / Break-even WACC Break-even WACC = ($1,000,000 / $7,000,000) * 100 Break-even WACC = 14.29% Therefore, the break-even WACC for this project is 14.29%.
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Weston Corporation just pold a dividend of $2 a shore (Do- 52). The dividend is expected to grow 11% a year for the next years and then at 4% a year thereafter. What is the expected dividend per share for each of the next 5 years?
The expected dividend per share for each of the next 5 years is $2.22, $2.47, $2.75, $3.06, and $3.41, respectively.
We can use the dividend growth model to calculate the expected dividend per share for each of the next 5 years. The formula for the dividend growth model is:
[tex]Dn = D0 x (1 + g)^n[/tex]
Where:
Dn = the expected dividend per share at year n
D0 = the current dividend per share
g = the expected growth rate of dividends
n = the number of years in the future
Using the information provided in the problem, we have:
D0 = $2 per share
g = 11% for the first five years, then 4% thereafter
So, the expected dividend per share for each of the next 5 years is:
[tex]D1 = D0 x (1 + g)^1 = $2 x (1 + 0.11)^1 = $2.22\\D2 = D0 x (1 + g)^2 = $2 x (1 + 0.11)^2 = $2.47\\D3 = D0 x (1 + g)^3 = $2 x (1 + 0.11)^3 = $2.75\\D4 = D0 x (1 + g)^4 = $2 x (1 + 0.11)^4 = $3.06\\D5 = D0 x (1 + g)^5 = $2 x (1 + 0.11)^5 = $3.41[/tex]
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suppose you are a risk-averse person that does not like volatile returns. stock a offers a steady return of 5% per year. stock b offers a 3% return with 50% probability and a 10% return with 50% probability. which stock do you prefer?
As a risk-averse person, I would prefer the steady return offered by stock A at 5% per year.
As a risk-averse person who does not like volatile returns, you would prefer a stock with a steady return rather than one with more variability. In this case, stock A offers a steady return of 5% per year, while stock B offers a range of returns, with a 50% chance of a 3% return and a 50% chance of a 10% return.
The expected return of stock B is calculated as follows:
Expected return of stock B = (0.5 x 3%) + (0.5 x 10%) = 6.5%
However, the expected return does not take into account the variability of returns. Given that you are risk-averse, the potential for a 3% return would not be appealing, even with a 50% chance of getting a higher return. Therefore, you would prefer the steady return of 5% offered by stock A.
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You are invested 38.00% in growth stocks with a beta of 1.839, 25.40% in value stocks with a beta of 1.412, and 36.60% in the market portfolio. What is the beta of your portfolio?
To calculate the beta of the portfolio, we need to first understand what beta represents. Beta is a measure of an investment's volatility in relation to the overall market. A beta of 1 means that the investment's volatility is equal to that of the market, while a beta greater than 1 indicates higher volatility and a beta less than 1 indicates lower volatility.
Using the information given, we can calculate the weighted average beta of the portfolio. To do this, we multiply the percentage of each investment by its respective beta, and then sum the results.
For the growth stocks, the calculation is 38.00% x 1.839 = 0.69982 ,For the value stocks, the calculation is 25.40% x 1.412 = 0.358968, For the market portfolio, the calculation is 36.60% x 1 = 0.366.
The sum of these calculations is 1.424788. This means that the portfolio has a beta of 1.424788, which is higher than the market beta of 1. This indicates that the portfolio is more volatile than the market as a whole, likely due to the higher weightings in growth and value stocks.
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A potato farmer needs to buy a new harvester Two types have performed satisfactorily in field trials The SpudFinder costs $100.000 and should last for five years. The Tater Taker also costs $100,000 but requires an extra operator at $20,000 per season. This machine has a service life of seven years. The salvage value of either machine is insignificant.If the farmer requires a 7% return on investment, which harvester should she buy?
Since the NPV of the Tater Taker is higher than that of the SpudFinder, the potato farmer should buy the Tater Taker harvester.
To determine which harvester the potato farmer should buy, we need to calculate the net present value (NPV) of each option. The NPV takes into account the initial investment, cash inflows, and outflows over the machine's lifespan discounted to the present value using the required rate of return.
For the SpudFinder harvester, the initial investment is $100,000, and it has a lifespan of five years. Assuming no additional operating costs, the annual cash inflows from the harvester are:
Year 1: $25,000
Year 2: $25,000
Year 3: $25,000
Year 4: $25,000
Year 5: $25,000
Using a discount rate of 7%, we can calculate the NPV of the SpudFinder as follows:
NPV = -$100,000 + $25,000/(1+0.07)^1 + $25,000/(1+0.07)^2 + $25,000/(1+0.07)^3 + $25,000/(1+0.07)^4 + $25,000/(1+0.07)^5
NPV = -$13,516.27
For the Tater Taker harvester, the initial investment is also $100,000, but it requires an additional operator costing $20,000 per year for seven years. The annual cash inflows from the harvester are:
Year 1: $25,000
Year 2: $25,000
Year 3: $25,000
Year 4: $25,000
Year 5: $25,000
Year 6: $25,000
Year 7: $25,000
Using a discount rate of 7%, we can calculate the NPV of the Tater Taker as follows:
NPV = -$100,000 - $20,000 + $25,000/(1+0.07)^1 + $25,000/(1+0.07)^2 + $25,000/(1+0.07)^3 + $25,000/(1+0.07)^4 + $25,000/(1+0.07)^5 + $25,000/(1+0.07)^6 + $25,000/(1+0.07)^7
NPV = -$4,712.59
Since the NPV of the Tater Taker is higher than that of the SpudFinder, the potato farmer should buy the Tater Taker harvester. Even though it requires an extra operator, the longer lifespan and additional cash inflows outweigh the additional cost.
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according to kerstein, allowing the buying and selling of kidneys will mean: a. poor people being reduced to commodities b. people having their autonomy better respected c. poor people having a good opportunity to get out of debt or invest in new opportunities d. all of the above
According to Kerstein, allowing the buying and selling of kidneys will mean poor people being reduced to commodities. The right answer is a.
One of the most popular reasons against legalising human kidney markets is that it would encourage the rampant abuse that already exists on the illicit market. Particularly, it is believed that legalising such marketplaces will lead to a rise in the number of people forced to sell their kidneys.
Furthermore, even if kidney markets were regulated, such coercion would still go place since people who were the target of it would be unable to benefit from the legal safeguards that regulation would provide.
The correct answer is option a.
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Flashy Company stock has a beta of 1.2, the risk free rate is
3.67, and the market risk premium is 7.18. What is the firm's
required rate of return. ______% (to two decimal places)
The required rate of return for Flashy Company stock can be calculated using the Capital Asset Pricing Model (CAPM):
Required rate of return = risk-free rate + beta * market risk premium
Required rate of return = 3.67 + 1.2 * 7.18
Required rate of return = 12.29%
To calculate Flashy Company's required rate of return, you need to use the Capital Asset Pricing Model (CAPM). The formula for CAPM is:
Required Rate of Return = Risk-Free Rate + (Beta × Market Risk Premium)
Calculating using the given terms: Risk-Free Rate = 3.67, Beta = 1.2, Market Risk Premium = 7.18
Required Rate of Return = 3.67 + (1.2 × 7.18)
Required Rate of Return = 3.67 + 8.616
Required Rate of Return = 12.286
Round the result to two decimal places: 12.29%
So, Flashy Company's required rate of return is 12.29%.
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TexCorp is a manufacturer. It costs TexCorp $70 (parts and labor) to manufacturer each unit, and it incurs fixed overhead of $3.75 million per year. If TexCorp prices the widgets using a 40% markup on cost, how many widgets must it sell annually in order to break even? Show work.
Based on the information given, TexCorp must sell 133,930 widgets annually in order to break even.
To find the break-even point for TexCorp, we will use the following terms: variable cost per unit, fixed cost, markup percentage, and selling price.
1: Calculate the variable cost per unit.
The variable cost per unit for TexCorp is $70 (parts and labor).
2: Calculate the selling price per unit.
TexCorp uses a 40% markup on cost, so we will calculate the selling price as follows:
Selling price = Variable cost per unit * (1 + Markup percentage)
Selling price = $70 * (1 + 0.40)
Selling price = $70 * 1.40
Selling price = $98 per unit
3: Calculate the contribution margin per unit.
Contribution margin per unit = Selling price per unit - Variable cost per unit
Contribution margin per unit = $98 - $70
Contribution margin per unit = $28
4: Calculate the break-even point in units.
Break-even point (units) = Fixed cost / Contribution margin per unit
Break-even point (units) = $3,750,000 / $28
Break-even point (units) = 133,929.29
Since TexCorp cannot sell a fraction of a widget, we round up to the nearest whole number.
Therefore, TexCorp must sell 133,930 widgets annually in order to break even.
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if the market price is $84.70 per bushel of wheat, and ali chooses to produce wheat, how much will he produce per month to maximize his profits in the short run?
Ali should produce 64.70 bushels of wheat per month to maximize his profits in the short run. At this level of output, his total revenue would be $5,481.59 (64.70 x $84.70), and his total cost would be $2,918.45 (20 x 64.70 + 0.5 x 64.70^2), resulting in a profit of $2,563.14.
To maximize his profits, Ali should produce the level of output where his marginal revenue (MR) equals his marginal cost (MC). In other words, he should produce until the additional revenue from selling one more unit of output is equal to the additional cost of producing one more unit of output.Given the market price of $84.70 per bushel of wheat, Ali's marginal revenue is also $84.70.
To determine his marginal cost, we need to know his total cost function. Let's assume that Ali's total cost function is given by TC = 20Q + 0.5Q^2, where Q is the quantity of wheat produced.
To find Ali's marginal cost, we take the derivative of the total cost function with respect to Q:
MC = dTC/dQ = 20 + Q
Setting MR = MC, we have:
84.70 = 20 + Q
Q = 64.70
Resulting in a profit of $2,563.14.
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