(Ignore income taxes in this problem.) The Sawyer Corporation has $145,000 to invest and is considering two different projects,
X and Y. The following data are available on the projects: Click here to view Exhibit 8B-1 and Exhibit 8B-2 to determine the appropriate discount factor(s) using tables. Project X Project Y Cost of equipment needed now $ 145,000 Working capital requirement - $ 145,000 Annual cash operating inflows $ 37,000 $ 32,000 Salvage value in 5 years $ 6,000 - Both projects will have a useful life of 5 years; at the end of 5 years, the working capital will be released for use elsewhere. Sawyer's discount rate is 9%. The net present value of project Y is closest to:
1 answer:
Answer: -$20,529.60
Explanation:
Net Present value of Y = Present Value of Inflows - Present value of Outflows
Present Value of Y inflows
$32,000 inflows for 5 years. This is therefore an annuity
Present value of annuity = Annuity * Present value interest factor, 9%, 5 years
= 32,000 * 3.8897
= $124,470.40
Net Present Value = 124,470.40 - 145,000
= -$20,529.60
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Answer:
the bond's price elasticity = - 0.67
Explanation:
present bond value = $1100
previous bond value = $900
change in bond value = $1100 - $900 = $200
present bond percentage = 8%
previous bond percentage = 12%
% change in bond value = 8% - 12% = - 4%
Bond price elasticity =
=
=
= - 0.67
Question: The question is incomplete. See the full question below and the answer.
You are an up-and-coming developer in downtown Seattle and are interested in constructing a building on a site you own. You have collected four bids from prospective contractors. The bids include both a cost ($millions) and time to completion (months):
Contractor Cost Time
A 100 20
B 80 25
C 79 28
D 82 26
The problem now is to decide which contractor to choose. B has indicated that for another $20 million, he could do the job in 18 months, and you have said that you would be indifferent between that bid and the original proposal. In talking with C, you have indicated that you would just as soon pay her an extra $million if she could get the job done in 26 months. Who gets the job? Explain your reasoning. (It may be convenient to plot the four alternatives on a graph.)
Answer:
See the explanation for the answer and find attached of the graph.
Explanation:
So we draw a regression line of Time vs Cost and best fit a curve based on the data given, given in the above figure. The four alternatives are marked in the figure as well. Our main objective is to reduce both time and cost, but that might not be possible So the best thing would be to look for alternatives which lie below the line. If C gets an extra million, then that point would come below the regression line, and it would be a better alternative than D, because for the same time we are getting the job done at a cheaper cost.
Also if B is paid extra 20 million, that point also comes below the regression line, and hence will be a better alternative than A because for the same cost again we are getting the job done earlier. We need to choose between B and C. Now in order to optimise both cost and time, we need to choose a point close to the middle point of the regression line segment in 1st quadrant. We see that C is much more closer to the middle point and hence seems like a better option.
So we choose C as our contractor if we consider B's alternative bid, but if we do not consider B's alternative bid and stick to the original one, we choose B as our contractor.
