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exis [7]
3 years ago
13

China Importers would like to spend $215,000 to expand its warehouse. However, the company has a loan outstanding that must be r

epaid in 2.5 years and thus will need the $215,000 at that time. The warehouse expansion project is expected to increase the cash inflows by $60,000 in the first year, $140,000 in the second year, and $150,000 a year for the following 2 years. Should the firm expand at this time? Why or why not? Multiple Choice Yes;a.because the money will be recovered in 2.10 years Yes;b.because the money will be recovered in 1.87 years No;c.because the project never pays back No;d.because the money will not be recovered in time to repay the loan Yes;e.because the money will be recovered in 1.69 years
Business
1 answer:
Nimfa-mama [501]3 years ago
4 0

Answer:

Yes;a.because the money will be recovered in 2.10 years

Explanation:

Assume the company takes uses the loan to expand, how much time will it take to pay back the loan?

This can be expressed as;

T=F+S+T

where;

T=total cash flow needed to repay the loan

F=cash flow for the first year

S=cash flow for the second year

T=cash flow for needed in the third year to pay the loan

In our case;

T=$215,000

F=$60,000

S=$140,000

T=unknown

replacing;

215,000=60,000+140,000+T

T+200,000=215,000

T=215,000-200,000=15,000

The cash flow needed in the third year to pay the loan=$15,000

Determine how long it will take to raise $15,000 in the third year;

total cash flow in the third year=$150,000

1 year=$150,000

To raise $15,000=15,000/150,000=0.1 years

Total number of years=1+1+0.1=2.1 years

It will take 2.1 years to pay back the loan.

The firm should expand since the money will be recovered in 2.1 years even before the repayment period.

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4 0
2 years ago
Suppose you inherited $275,000 and invested it at 8.25% per year. How much could you withdraw at the end of each of the next 20
navik [9.2K]

Answer:

withdraw amount  = 28532.45

so correct option is  a. $28,532

Explanation:

given data

present amount  = $275,000 bonus

interest rate = 8.25% per year  = 0.0825

time period = 20 year

solution

first we get here Cumulative discount factor that is

Cumulative discount factor = \frac{(1-(1+r)^{-t}}{r}   .........................1

here r is rate and t is time period

put here value and we will get

Cumulative discount factor = \frac{(1-(1+0.0825)^{-20}}{0.0825}    

solve it we get

Cumulative discount factor =  9.638148

and now we get  so here withdraw amount at the end of each of the next 20 years that is

withdraw amount = Present amount ÷ cumulative discount factor   ............2

put here value

withdraw amount = \frac{275000}{9.638148}    

solve it we get

withdraw amount  = 28532.45

so correct option is  a. $28,532

8 0
3 years ago
20
Elden [556K]

Answer:

Red X

Explanation:

...

3 0
3 years ago
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4 0
1 year ago
Clear Co.’s trial balance has the following selected accounts: Cash (includes $10,000 in bond-sinking fund for long-term bond pa
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Answer:

Explanation:

The computation of the amount that is reported as a total current assets is presented below:

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Current assets

Cash                                                  $40,000   ($50,000 - $10,000)

Accounts Receivable                       $20,000

less-Allowance for doubtful debts - $5,000

Deposits from customers                 $3,000

Merchandise Inventory                     $7,000

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Investment in trading debt securities $2,000

Total amount                                      $68,000

6 0
3 years ago
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