1answer.
Ask question
Login Signup
Ask question
All categories
  • English
  • Mathematics
  • Social Studies
  • Business
  • History
  • Health
  • Geography
  • Biology
  • Physics
  • Chemistry
  • Computers and Technology
  • Arts
  • World Languages
  • Spanish
  • French
  • German
  • Advanced Placement (AP)
  • SAT
  • Medicine
  • Law
  • Engineering
eimsori [14]
3 years ago
15

(Present value tables are needed.) Miami Marine Enterprises is evaluating the purchase of an elaborate hydraulic lift system for

all of its locations to use for the boats brought in for repair. The company has narrowed their choices down to two: the B14 Model and the F54 Model. The B14 model is considered to be riskier than the F54 model so the rate of return required for it is higher. Financial data about the twochoices follows.
B14 Model F54 Model
Investment $ 320,000 $ 240,000
Useful life (years) 8 8
Estimated annual net cash inflows for useful life $ 75,000 $ 40,000
Residual value $ 30,000 $ 10,000
Depreciation method Straight-line Straight-line
Required rate of return 14% 10%

What is the total present value of future cash inflows and residual value from the B14 Model?

A. $218,070
B. $410,655
C. $358,455
D. $38,455
Business
1 answer:
amm18123 years ago
8 0

Answer:

C. $358,455

Explanation:

As per given data

                                                           B14 Model    F54 Model

Investment                                         $320,000    $240,000

Useful life (years)                                      8                 8

Estimated annual net cash inflows   $75,000      $40,000

Residual value                                    $30,000     $10,000

Depreciation method Straight-line Straight-line

Required rate of return                        14%                10%

Net Present value of the net cash inflows can be calculated by using the formula of present value of annuity because the cash inflows of each year are constant cash flows.

Present value of Annuity = P x [ ( 1 - ( 1 + r )^-n ) / r ]

Where

P = Annual cash inflows = $75,000

r = required rate of return = 14%

n = numbers of periods = 8 years

Placing values in the formula

Present value of cash inflows = $75,000 x [ ( 1 - ( 1 + 14% )^-8 ) / 14% ]

Present value of cash inflows = $347,915

Present value of residual value of asset can be calculated by discounting the residual value using required rate of return.

Formula for Discounting

Present value = P (1 + r)^-n

Where

P = Value to be discounted = $30,000

r = required rate of return = 14%

n - numbers of periods = 8 years

Placing values in the formula

Present value of residual value = $30,000 x ( 1 + 14% )^-8 = $10,517

Total Present value = $10,517 + 347,915 = 358,432

There is a difference due to the rounding effect in the calculations, the closest value id C. $358,455

You might be interested in
Scientists are still a long way from fully understanding the psychological effects of video games.
taurus [48]
Interesting is there a question?
6 0
3 years ago
The set of values, attitudes, and ways of doing things that result from belonging to a certain ethnic, religious, or racial grou
777dan777 [17]

Answer: False

Explanation:

What a ethnic, religious and racial group shares in common is their beliefs or traditions.

Cognitive dissonance on the other hand is a conflict that occurs in an individual's mind as a result of new information contradicting what they already believe to be true.

4 0
3 years ago
Read 2 more answers
The major difference between nominal GDP and real GDP is: nominal GDP measures the value of output with constant output levels,
Andrei [34K]

Answer:

The correct answer is "nominal GDP measures the value of output in current-year prices, while real GDP measures output using constant prices."

Explanation:

The real GDP growth is the value of all goods produced in a given year; nominal GDP is the value of all the goods taking price changes into account.

The nominal GDP is the value of all the final goods and services that an economy produced during a given year. It is calculated by using the prices that are current in the year in which the output is produced. The nominal GDP takes into account all of the changes that occurred for all goods and services produced during a given year. For example, a nominal value can change due to shifts in quantity and price.

The real GDP is the total value of all of the final goods and services that an economy produces during a given year, accounting for inflation. It is calculated using the prices of a selected base year.

The correct answer is "nominal GDP measures the value of output in current-year prices, while real GDP measures output using constant prices."

7 0
3 years ago
According to the video, which food safety regulations have been created by the passage of the Food Safety Modernization Act? Che
TiliK225 [7]

the answers are 2,3,5

7 0
3 years ago
Read 2 more answers
When shopping you notice that a pair of jeans costs $20 and that a tee-shirt costs $10. you compute the price of jeans relative
WARRIOR [948]
So, the dollar price of the jeans is the nominal variable, and the relative price is the real variable.   The relative price of the jeans have been adjusted to inflation. The dollar price hasn't been adjusted for inflation, hence why it is the nominal variable (not adjusted for inflation).
5 0
3 years ago
Other questions:
  • In September 2009 a U.S. investor chooses to invest $500,000 in German equity securities at a then current spot rate of $1.30/eu
    14·1 answer
  • Q 9.1: When can interest be included in the acquisition cost of a plant asset?A : during the construction period of a self-const
    13·2 answers
  • The key to building a network is to: a. be able to ask for favors. b. convince someone to do something that he or she may not or
    15·1 answer
  • William pays his $500 premium every 6 months for automobile insurance with collision coverage. His deductible is $750. William c
    13·2 answers
  • Which of the following statements is CORRECT?
    13·1 answer
  • What written document gives public notice that a mortgaged property may soon have a judgment issued against it
    14·1 answer
  • Drivers must stop at red lights so that they do not get in car accidents. This is an example of
    10·2 answers
  • Mopsun, a garment store, sells customized hoodies at $7 per unit. The total fixed costs add up to $8,000 per year, and the varia
    7·1 answer
  • If the fed sells $5 billion of u. S. Bonds in the open market and the reserve requirement is 5 percent, m1 will eventually:.
    15·1 answer
  • Explain other roles of quality circle as part of continuous improvement to process and systems​
    7·1 answer
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!