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PIT_PIT [208]
2 years ago
11

Assume that potential projects X, Y and Z will each pay a total of $100,000 over 20 years. X pays $8,000 per year for 10 years a

nd $2,000 per year for 10 years. Y pays $2,000 per year for 10 years and $8,000 per year for 10 years. Z pays $5,000 per year for 20 years. Which project is likely to be most attractive to an investor?

Business
1 answer:
Marrrta [24]2 years ago
6 0

Answer:

The answer is Project X is the most attractive to an investor.

Explanation:

We can use the definition of Net Present Value (NPV) to solve this problem and figure out which would be the best investment.

Net present value is the present value of future money. In other words, over certain period of time, how much is your investment worth today. It takes into consideration cash inflow and outflow over that period of time as well as interest that could be earned on alternative investments if you had the money today. See attachment to see the NPV formula.

In the attachment, we calculate the NPV for each one of the projects using a rate of return i=3% for all of them. Any rate of return could be used as long as they are the same for all projects.

A positive NPV value means a good investment and the higher that number is the better the investment. In this case, we can see that Project X has the higher NPV of all the projects. Therefore, project X is the most attractive for an investor.

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Trapper Corporation is comparing two different capital structures, an all-equity plan (Plan I) and a levered plan (Plan II). Und
AlladinOne [14]

Answer:

Plan I EPS = $2.19

Plan II EPS = $1.97

Explanation:

The computation of EPS for both Plan I and Plan II is shown below:-

                               Plan I                Plan II

Expected EBIT      $700,000       $700,000

Less Interest                                 $227,200

                                            ($2,272,000 × 10%)

Profit before tax a   $700,000      $472,800

Less: Tax

Earning to equity

shareholder b           $700,000      $472,800

Number of equity

Shares (a ÷ b)              $2.19             $1.97

Therefore for Plan I the EPS = $2.19 and for Plan II the EPS = $1.97

6 0
2 years ago
According to the Keynesian transmission mechanism, if the Fed conducts an open market purchase of government securities, it may
marin [14]

Answer:

b.a movement down and along a given investment demand curve

Explanation:

The federal reserve used purchase and sale of government securities to control liquidity within the economy. When there is excess liquidity government securities are sold toop up cash. When there is low liquidity the government buys up securities to increase liquidity.

In this instance if the government buys securities it will cause a movement down and along investment demand curve. That is it will result in lower prices and higher quantity being purchased

4 0
3 years ago
Economic activities whose location does not rely on factors such as the location of raw materials, transportation costs, and lar
algol13

Answer:

The correct answer is: Footloose Activities.

Explanation:

Footloose Activities are those that do not change in costs regardless of the location where they are performed. In the corporate world, Footloose Industries are usually those that have almost fixed manufacturing costs anywhere around the world and include computer chips production, for instance.

6 0
3 years ago
Harold Corporation has an existing contract to sell 200 units of product to a customer at $10 each. After the delivery of 150 un
nika2105 [10]

Answer:

C. $142.50

Explanation:

From the existing contract,

200 units for $10 each

150 units were delivered so, 10 x 150= $1500.

The customer wants to extend the contract for additional 100 units at $9.50 each.

So,what is the revenue to Harold Corporation for these additional units which cost $9.50 for the next 15 units.

Therefore, 15 x 9.50=  $142.504

4 0
3 years ago
Read 2 more answers
The matching concept a. determines that expenses related to revenue be reported at the same time the revenue is reported b. addr
OLga [1]

Answer:

The correct answer is letter "A": determines that expenses related to revenue be reported at the same time the revenue is reported.

Explanation:

According to the matching accounting principle, during the same accounting period, the revenues and expenditures needed to generate such revenues have to be recorded. This is part of the accrual accounting method that specifies expenses and revenue must be recorded when incurred not when cash is received.

6 0
2 years ago
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