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AysviL [449]
3 years ago
6

Wansley Lumber is considering the purchase of a paper company. Purchasing the company would require an initial investment of $30

0 million. Wansley estimates that the paper company would provide net cash flows of $40 million at the end of each year for the next 20 years. The cost of capital for the paper company is 13%.
a. Should Wansley purchase the paper company?
Business
1 answer:
Deffense [45]3 years ago
4 0

Answer:

a. NO

Explanation:

In this question we have to find out the net preset value which is shown below:

= Present value of all annual cash inflows after implementation of discount factor - initial investment  

where,  

The Initial investment is $300 million

All yearly cash flows would be

= Annual net cash flows × PVIFA for 20 years at 13%  

= $40 million  × 7.0248

= $280.992 million

Refer to the PVIFA table

So, the net present value would be

= $280.992 million - $300 million

= -$19.008 million

Since the net present value comes in negative, so the wansley should not purchase the paper company

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A broker-dealer offers 4 summer passes to an amusement park to each of its agents who sell at least $10,000 of bonds during the
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I (allowed) and IV (not considered soft dollar compensation)

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4 years ago
The Nasdaq Composite Index: a. is made of of mainly newer, smaller firms. b. is a price-weighted index. c. is made up of over 50
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A. is made of of mainly newer, smaller firms.

Explanation:

4 0
3 years ago
A firm's attempts to shorten the length of time a process takes, may lead to disappointing outcomes because of ______.
liraira [26]

A firm's attempts to shorten the length of time a process takes may lead to disappointing outcomes because of time compression diseconomies.

<h3>What are time compression diseconomies?</h3>
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4 0
2 years ago
a 17-year annuity pays $1,100 per month, and payments are made at the end of each month. The interest rate is 16 percent compoun
zzz [600]

Answer:

The present value of the annuity is $73,091.50

Explanation:

Use the following formula to calculate the present value of the annuity

Present value of annuity = ( Annuity Payment x Annuity factor for first 6 years ) + [ ( Annuity Payment x Annuity factor for after 6 years ) x Present value factor  for 6 years ]

Where

Annuity Payment = $1,000

Annuity factor for first 6 years = 1 - ( 1 + 16%/12 )^-(6x12) / 16%/12 = 46.10028344

Annuity factor for after 6 years = 1 - ( 1 + 13%/12 )^-((17-6)x12) / 13%/12 = 70.0471029820

Present value factor for 6 years = ( 1 + 16%/12)^-(6x12) = 0.385329554163

Placing values in the formula

Present value of annuity = ( $1,000 x 46.10028344 ) + [ ( $1,000 x 70.0471029820 ) x 0.385329554163 ]

Present value of annuity = $46,100.28 + $26,991.22

Present value of annuity = $73,091.50

4 0
3 years ago
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