Answer: 1.68
Explanation:
From the question, we are informed that a proposed project has fixed costs of $47,000 per year and that the operating cash flow at 11,000 units is $69,000.
Ignoring the effect of taxes, the degree of operating leverage will be:
= 1 + ($47,000/$69,000)
= 1 + 0.68
= 1.68
Answer:
Instructions are listed below.
Explanation:
Giving the following information:
The initial investment for each project is $50,000. Project A will generate cash inflows equal to $15,625 at the end of each of the next five years; Project B will generate only one cash inflow in the amount of $99,500 at the end of the fifth year (i.e., no cash flows are generated in the first four years). The required rate of return of Ace Inc. is 10 percent.
To determine which project to choose we need to use the following formula:
NPV= -Io + ∑[Cf/(1+i)^n]
Cf= cash flow
Project A:
Io= -50,000
Year 1to 5= 15,625
NPV= $9,231.04
Project B:
Io= 50,000
Year 5= 99,500
NPV= -50,000 + 99,500/1.10^5= 11,781.67
The highest NPV is the best option. Therefore, project B is the best.
Answer:
Instructions are listed below.
Explanation:
Giving the following information:
Cash flows= $8,000
Grow at a rate of 4% per year indefinitely.
We need to find the present value using the following formula:
Present Value= periodic payment/ (i - g)
i= interest rate
g= growth rate
A) Interest rate= 15%
PV= 8,000/ (0.15 - 0.04)= $72,727.27
B) i= 13%
PV= 8,000/ (0.13 - 0.04)= $88,889
Answer:
14.52%
Explanation:
The computation of the rate of return on the stock is shown below:-
The expected rate of return on the stock = Beta × (Rate of return - Market rate of return)
= 1.2 × (0.121 - 0.145)
= - 2.88%
So, the expected rate of return on the stock = Current percentage - expected rate of return on the stock
= 0.174 - 0.0288
= 14.52%
Therefore we simply applied the above formulas
