Which element of a business does the following statement represent?

Assume you have two projects with different lives. Project A is expected to generate present value cash flows of $5.2 million an

Alex787 [66]

Answer:

$1,033,190.69 ; better

Explanation:

Given:

Present value of cash flow of Project A (PV) = $5,200,000

Maturity (nper) = 7 years

Required return (rate) = 9%

Annual annuity (pmt) can be computed using spreadsheet function =pmt(rate,nper,PV,FV). Substituting the values, we get,

=pmt(0.09, 7, -5200000)

=$1,033,190.69

FV is 0. Present value is negative as it's cash outflow.

Annual annuity of Project A is $1,033,190.69

Project B:

Given:

Present value of cash flow of Project A (PV) = $3,800,000

Maturity (nper) = 5 years

Required return (rate) = 9%

Annual annuity (pmt) can be computed using spreadsheet function =pmt(rate,nper,PV,FV). Substituting the values, we get,

=pmt(0.09, 5, -3800000)

=$976,951.34

FV is 0. Present value is negative as it's cash outflow.

Annual annuity of Project B is $976,951.34

Annual annuity of Project is more than that of Project B, So Project A is better than Project B.

8 0

3 years ago

a. Long-term bonds have fewer risks than short-term bonds. b. Long-term bonds have more risks associated with them, and bring in

garri49 [273]

Complete Question:

What are the benefits of a long-term bond over a short-term bond?

Answer:

c. While long-term bonds have more risks associated with them, they have the potential to bring in higher returns for the initial investment.

Explanation:

A bond can be defined as a debt or fixed investment security, in which a bondholder (investor or creditor) loans an amount of money to the bond issuer (government or corporations) for a specific period of time. The bond issuer are expected to return the principal (face value) at maturity with an agreed upon interest (coupon), which are paid at fixed intervals.

Bonds are generally debts, which may be floated in different ways with respect to the issuer of the bond and its type. Bonds are used by government and corporate institutions to borrow money with interest and they also have to pay for the face value of the bonds at maturity.

Bonds are classified into two (2) main categories and these are;

I. Long-term bonds: they usually spread over a long period of time and as such locking the money of an investor down while availing them a higher interest rate. Also, they are considered to be more riskier than shorter bonds.

II. Short-term bonds: this type of bond mature quickly and as such paying the investor's principal on time. It covers a period of one to five years maximum in duration.

Hence, the benefits of a long-term bond over a short-term bond is that, while long-term bonds have more risks associated with them, they have the potential to bring in higher returns for the initial investment.

5 0

3 years ago

I'maSolarPanelCo. manufactures and distributes solar panels in the US market. Two years ago, it had 5 US competitors, but govern

Harlamova29_29 [7]

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5 0

3 years ago

Halestorm Corporation’s common stock has a beta of 1.20. Assume the risk-free rate is 4.5 percent and the expected return on the

Lemur [1.5K]

Answer:

Ke = Rf + β(Rm – Rf)

Ke = 4.5 + 1.20(12-4.5)

Ke = 4.5 + 9

Ke = 13.5%

Explanation:

Cost of equity is equal to risk-free rate plus market risk premium. Market risk premium is beta multiplied by risk premium. Risk premium is market return minus risk-free rate.

8 0

3 years ago

Flannery Corporation owns machinery with a book value of $520,000. It is estimated that the machinery will generate future cash

Aleonysh [2.5K]

Answer:

(d)$105,000.

Explanation:

Since the book value is more than the generated future cash flows so book value cannot be recovered. In this case, the generated future cash flows are ignored

In this scenario, we compare the values between book value and the fair value of machinery, the difference would be the loss on impairment of the asset

In mathematically,

= Book value of machinery - fair value of machinery

= $520,000 - $415,000

= $105,000

5 0

3 years ago