What is the world's most expensive drink?

You are considering two equally risky annuities, each of which pays $5,000 per year for 10 years. Investment ORD is an ordinary

liubo4ka [24]

Answer:

A rational investor would be willing to pay more for DUE than for ORD, so their market prices should differ.

Explanation:

If both annuities pay the same amount ($5,000 per year), then the present value of the annuity due will always be higher than the present value of the ordinary annuity. Therefore, an investor will always be willing to pay more (at equal risk) for the annuity due than the ordinary annuity.

E.g. let say that both annuities carry a 10% interest rate.

The present value of the annuity due is:

PV = $5,000 + [$5,000 x 5.7590 (PV annuity factor, 10%, 9 periods)] = $33,795

The present value of the ordinary annuity is:

PV = $5,000 x 6.1446 (PV annuity factor, 10%, 10 periods) = $30,723

The logic behind this is that $1 today is worth more than $1 tomorrow, and the annuity due's first payment is today, while the ordinary annuity's first payment is in 1 year.

4 0

3 years ago

If a firm's marginal costs _____ then its _____. Group of answer choices rise; output increases fall; best-response curve shifts

ziro4ka [17]

If a firm's marginal costs fall, then its price falls.

This is based on the principle that if the marginal cost of a product or firm rises, that implies that the firm is operating at a high fixed cost, thereby leading to an increase in the cost of production, which generally equates to products having a high price.

On the other hand, where there is low marginal cost, production costs reduce because the products are being produced at a lower fixed cost. Thereby leading to lower prices.

Hence, in this case, it is concluded that "If a firm's marginal costs fall, then its price falls."

Learn more here: brainly.com/question/10474336

7 0

2 years ago

Chuck has $2,500 invested in a bank that pays 4% annually. The length of time it will take for his funds to double is closest to

Arada [10]

Answer:

The answer is 17.67 years.

Explanation:

Present value is $2,500

Future value of the money to be double of the present value. This means the future value will be $5,000($2,500 x 2)

Interest rate is 4%

Number of years or periods to reach this $5,000 is unknown. So we are looking for this.

To compute this number of periods, lets use Financial calculator.

I/Y = 4; PV= -2,500; FV= 5,000; CPT N= 17.67 years.

Therefore, the number of years to accumulate to $5,000 is 17.67 years

7 0

3 years ago

Southern Tours is considering acquiring Holiday Vacations. Management believes Holiday Vacations can generate cash flows of $218

Pepsi [2]

Answer:

$519,799.59

Explanation:

Discount rate = R = 14.50%

Year Cash flows Discount factor PV of cash flows

1 218,000.00 0.873362 190,393.0131

2 224,000.00 0.762762 170,858.6793

3 238,000.00 0.666168 158,547.9011

Total of PV = NPV =  $519,799.59

Note:

Df = 1/(1+R)^Year

PV of cash flows = Cash flows x Df

7 0

3 years ago

Managers in international businesses will need to evaluate the attractiveness of a country as a market or location for a facilit

ludmilkaskok [199]

Answer: Please refer to Explanation

Explanation:

When Evaluating a country's attractiveness for investment, there are several factors that should be evaluated. Key amongst them are, Benefits, Costs and Risks.

Under Benefits, the economy is evaluated based on the benefits it brings to the table. It's strengths and Opportunities. The goal is to see if these benefits present the company with adequate enough incentives to want to invest.

Under Costs, the cost of setting up and thriving is evaluated. What does the company have to pay and who do they have to pay it to in order to set up properly.

Under Threats, the factors that could adversely affect the company as a result of Investing in the country are evaluated. This is very important to know so that if need be, contingencies can be established.

Classifying the above.

1. Middle-class population growth potential. EVALUATE BENEFITS.

The middle class are the main purchasers of goods and services in the economy. In evaluating benefits the potential growth rate of the middle class should be evaluated.

2. First-mover advantages. EVALUATE BENEFITS.

Evaluating the potential benefits to be had from investing first in a country is part of Benefits Evaluation.

3. Bribe payments. EVALUATE COSTS.

Bribery payments are a cost when it comes to setting up in corrupt nations. They need to be evaluated as costs.

4. Unexpected political change. EVALUATE RISKS.

Under the evaluation of risks, this should be evaluated because a new Political leadership could have a different attitude to the company and this is a threat.

5. Infrastructure issues. EVALUATE COSTS.

Under the evaluation of cost there must be an evaluation of infrastructural issues in the country. If there are infrastructural challenges, the cost of setting up will be higher because depending on the infrastructure you'd have to bring in infrastructure from other areas and that would be expensive.

6. Resolving contract disputes. EVALUATE COSTS.

What are the costs of resolving contract disputes in the country. If they are favourable then the country is fine.

7. Free market economy. EVALUATE BENEFITS.

A free Market Economy is very useful to Entreprise. The type of economy needs to be evaluated therefore to see if it is a Free Market Economy that can benefit the company.

8. Economic uncertainty. EVALUATE RISKS.

How stable is the economy of the country in question. A country with an unstable Economy is one with a lot of Uncertainty and any company going in there will have to risk suffering losses if the Economy goes through peril.

7 0

3 years ago