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1 year ago

The time value of money is explicitly considered in which one of the following capital budgeting method(s)?

Business

1 answer:

Alexandra [31]1 year ago

4 0

The time value of money is explicitly considered in Net present value (NPV) capital budgeting methods.

The process of deciding whether to invest in capital assets is known as capital budgeting. Companies can more efficiently assess and prioritize which projects, programs, and other investment assets could be the most financially advantageous in the long-term by integrating strategically planned capital budgeting into their financial processes. Internal Rate of Return, Net Present Value, Profitability Index, Accounting Rate of Return, and Payback Period are the five capital budgeting methodologies.

An investment opportunity's whole value is intended to be captured by the financial term known as Net Present Value (NPV). The goal of NPV is to forecast all potential future cash inflows and outflows related to an investment, discount each one to the present, and then tally them all up.

Learn more about capital budgeting methods here:

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Suspect Corp. issued a bond with a maturity of 30 years and a semiannual coupon rate of 6 percent 4 years ago. The bond currentl

kifflom [539]

Answer and Explanation:

The computation of each point is shown below:-

But before that we need to do the following calculations

First Issue of Bonds:

Face Value = $45,000,000

Market Value = 95% × $45,000,000

= $42,750,000

Annual Coupon Rate = 6%

Semiannual Coupon Rate = 3%

= 3% × $45,000,000

= $1,350,000

Time to Maturity = 26 years

Semiannual Period to Maturity = 52

Let semiannual YTM be i%

$42,750,000 = $1,350,000 × PVIFA(i%, 52) + $45,000,000 × PVIF(i%, 52)

N = 52

PV = -42750000

PMT = 1350000

FV = 45000000

I = 3.20%

Semiannual YTM = 3.20%

Annual YTM = 2 × 3.20%

Annual YTM = 6.40%

Before-tax Cost of Debt = 6.40%

After-tax Cost of Debt = 6.40% × (1 - 0.40)

= 3.84%

Second Issue of Bonds:

Face Value = $50,000,000

Market Value = 54% × $50,000,000

= $27,000,000

Time to Maturity = 15 years

Semiannual Period to Maturity = 30

Let semiannual YTM be i%

$27,000,000 = $50,000,000 × PVIF(i%, 30)

Using a financial calculator:

N = 30

PV = -27000000

PMT = 0

FV = 50000000

I = 2.075%

Semiannual YTM = 2.075%

Annual YTM = 2 × 2.075%

= 4.15%

Before-tax Cost of Debt = 4.15%

After-tax Cost of Debt = 4.15% × (1 - 0.40)

= 2.49%

a. The total book value of debt is

Total Book Value of Debt = $45,000,000 + $50,000,000

= $95,000,000

b. The total market value of debt is

Total Market Value of Debt = $42,750,000 + $27,000,000

= $69,750,000

c. The estimate of the aftertax cost of debt is

Weight of first Issue of Debt is

= $42,750,000 ÷ $69,750,000

= 0.6129

Weight of second issue of Debt

= $27,000,000 ÷ $69,750,000

= 0.3871

So,

Estimated After-tax Cost of Debt is

= 0.6129 × 3.84% + 0.3871 × 2.49%

= 3.32%

6 0

3 years ago

In an interview, a tough question _____. A. May show the interviewer how you think under pressure b. May be designed to rattle y

m_a_m_a [10]

Answer:

D) All of the above

Explanation:

In a job interview, the interviewer must try to determine if a candidate fits the job profile or not, and he/she really has a very limited amount of time. A very effective way of knowing someone is how that person reacts under pressure when faced with really tough and problematic situations. Being interviewed is already tough, and a really difficult question that doesn't necessarily have a right or wrong answer doesn't make it easier.

Many times the applicant's reaction is more important than the answer itself.

3 0

3 years ago

Read 2 more answers

A semi-conductor company has established a plant overseas in south africa where the power grid is somewhat unreliable. the plant

alisha [4.7K]

The answer is "economic risks".

Economic risk is the possibility that macroeconomic conditions like trade rates, government direction, or political security will influence a venture, typically one in a remote nation. Beside the business hazard related with making the plant profitable, the semi-conductor company is open to economic risk.

4 0

3 years ago

Suppose that, in a competitive market without government regulations the equilibrium price of gasoline is $3.00 per gallon.

yKpoI14uk [10]

Answer:

price floor , binding

price ceiling binding

price floor , non binding

Explanation:

A price floor is when the government or an agency of the government sets the minimum price of a product. A price floor is binding if it is set above equilibrium price.

Price ceiling is when the government or an agency of the government sets the maximum price for a product. It is binding when it is set below equilibrium price

Because firms are unable to hire workers due to the minimum wage laws., it means it is binding price floor

Equilibrium price is $3 and the maximum price is $2.70 . Thus, it is a binding price ceiling

Equilibrium price is $3 and the minimum price is $2.70 . Thus, it is a binding floor

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3 years ago

According to the consumer bill of rights, the idea that consumers' interests should receive full and sympathetic consideration i

Serga [27]

Answer:

right to the consumer.

Explanation:

According to the customer bill of rights, in this doctrine the consumers' enthusiasm should obtain adequate and compassionate deliberation in the formulation of the government strategy is identified as the right to the consumer. Proceeding from March 15 the year 1962, President John F. Kennedy portrayed a conversation to the Congress of the US in which the president extolled 4 fundamental customer powers, following described as Consumer Bill of Rights. The UN by the UN guide-manual for Consumer Protection extended those into 8 equities, and consequently, Consumers International affirmed those equities as law and began identifying on 15 of the March as World Consumer Rights.

3 0

3 years ago