The memo line is the least important part.
Answer:
While taking a capital budgeting decision of source of fund, or the capital project to be chosen, we sometimes use Payback Period
It is defined as the tenure in which the cash flows will realize the cost of project, that is the period in which the entire cost will be paid back.
This provides the information regarding the time after which the project will be profitable, or the time at which it will reach break even.
The payback uses the criteria that if the payback period calculated is less than life of project it shall be accepted, in case it is equal to life of project then there will be no profit no loss, and in case payback is higher than life of project then there will be loss.
Answer:
c. $37.50
Explanation:
The computation of the market value of the stock split is shown below:
= Current market value ÷ four ÷ one
= $150 per share ÷ 4 ÷ 1
= $150 per share ÷ 4
= $37.50
Simply we divide the current market value by the four for one stock split ratio so that the correct market value can come. The four for one reflect the ratio criteria which is mentioned in the question
All other information which is given is not relevant. Hence, ignored it
Answer:
Annual deposit= $37,714.37
Explanation:
Giving the following information:
The villa costs $500,000 today, and housing prices in Mexico are expected to increase by 6% per year. Manny and Irene want to make fifteen equal annual payments into an account, starting today, so there will be enough money to purchase the villa in fifteen years.
The account earns 10% per year.
First, we need to calculate the final value of the house with the following formula.
FV= PV*(1+i)^n
FV= 500,000*(1.06^15)=$1,198,279.1
Now, we can calculate the annual payments required:
FV= {A*[(1+i)^n-1]}/i
A= annual deposit
Isolating A:
A= (FV*i)/{[(1+i)^n]-1}
A= (1,198,279.1*0.10)/[(1.10^15)-1]
A= $37,714.37
