Answer:
$850
Explanation:
Data provided in the question:
Initial investment = $15,000
Expected annual net cash flows over four years, R = $5,000
Return on the investment = 10% = 0.10
Present value of an annuity factor for 10% and 4 periods, PVAF = 3.1699
The present value of $1 factor for 10% and 4 periods = 0.6830
Now,
Net present value = [ R × PVAF ] - Initial investment
= [ $5,000 × 3.1699 ] - $ 15,000
= $15,849.50 - $ 15000
= $849.50 ≈ $850
Answer: $50
Explanation:
We can use the Gordon Growth Model of Stock Valuation. The formula is thus,
P = D1 / r – g
D1 = the annual expected dividend of the next year
r = rate of return
g = the expected dividend growth rate (assumed to be constant)
There is no growth potential and dividends are expected to stay the same so no growth rate and D1 will be the same as D0.
Plugging that into the formula therefore will give us
P = D1/r
P= 4.5/0.09
= $50
Current Stock Price is $50.
Answer:
b) Nothing, because you are already minimizing cost
Explanation:
cost of producing one additional unit by hiring more workers = $10 / 50 units = $0.20 per unit
cost of producing one additional unit by buying the machine = $200 / 1,000 units = $0.20 per unit
Since labor exhibits a diminishing return, the next unit of labor will produce less than 50 units. This means that if you want to increase production, you should buy the machine.
Using the same logic, the previous units of labor were able to produce more than 50 units, which means that the average total cost was lower using labor than the machine. So if the company's concern is to minimize costs, then they are already doing so.
Answer:
A period in which the economy is growing at a rate significantly above normal.
Explanation:
The economy experiences relatively fast growth during the expansion process, interest rates continue to be small, output rises and inflationary pressures are building up. Once the economy reaches a low point, the cycle peak is reached, and development starts to recover.
Expansion is sometimes described as the first step in the business cycle, but this is an arbitrary point of departure, here the economy has a constant stream in the supply of capital, and the investment booms.
Answer:
The dates for the interest and maturity payments are fixed.
Explanation:
When a company issues bonds instead of stock, one of the disadvantages of doing so is that they have to pay the coupons or the full face value of the bonds at specific dates. Either they pay coupons annually or semiannually, and the face value is paid at maturity.
Since the dates are set beforehand, the company has to have the funds for these payments set aside. Instead, if the company would have issued stock, it would have greater freedom in deciding when and how much it should pay as dividends.
