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Colt1911 [192]
3 years ago
10

You are a consulting firm intern and your job is to help a client choose investment projects. Your client, RealEstate, is a youn

g and growing commercial and residential real estate firm. After reading through all the related information of those projects, you have compiled the following cash flow projections:CFO CF1 CF2 CF3 project 1 100 50 50 50 project 2 -80 40 45 50 project 3 -70 30 40 50 project 4 -60 30 40 60 project 5 -50 25 30 70CF0 denotes the initial investment. CF1 is the cash flow at the end of the first year. CF2 is the cash flow at the end of the second year, and so on. The units are millions of dollars.You were told that the opportunity cost of capital for all these projects is 35%. Which project(s) should you reject? (choose all that apply)(a)Project 1(b)Project 2(c)Project 3(d)Project 4(e)Project 5(f)None
Business
1 answer:
vredina [299]3 years ago
4 0

Answer:

Project 1, 2 and 3 should be rejected.

Explanation:

This problem required us to tell which project we should not accept. To solve this we have to apply this rule that is accept the project with positive NPV.

The detail calculation are given below.

The discount factors to be used for CFO, CF1, CF2 and CF3 is 1, 0.74, 0.55 and 0.41 respectively. It is calculated by using following formula.

               DF= (1 + i)^-n (n is period and i is 35%)

So now calculating NPV of each project by multiplying cashflow with discount factor.

Project 1 = -100+ (50*0.74 ) + (50*0.55) + (50*0.41) = -15 M dollars

Project 2 = -80 + (40*0.74) + (45*0.55) + (50*0.41) = -5.15 M dollars

Project 3 = -70 + (30 *0.74) + (40*0.55) + (50*0.41) = -5.3 M dollars

Project 4 = -60 + (30 *0.74) + (40*0.55) + (60*0.41) = 8.8 M dollars

Project 5 = -50 + (25 *0.74) + (30*0.55) + (70*0.41) =  13.7 M dollars

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Answer:

Opportunity cost are experienced whenever choices are made

Explanation:

Scarce resources means the shortage or unavailability of resources required for production of goods and services . In fact economists believe that all resources are scarce because of the limit to the availability of factors of production involved in the production.

To manage scarcity , economist came up with the principle of opportunity cost.

Opportunity cost is the cost of the alternative forgone while making a choice.

This means that as a man may not be able to meet up with all his needs due to scarcity of resources , he will need to select the ones that are of utmost importance and forgo the other needs on the list , whichis the opportunity cost of the transaction.

5 0
3 years ago
Suppose at an output level of 150 units a firm's average fixed cost is $25 and average variable cost is $50. Then the average to
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The average total cost of the firm is $75.

<h3>What is the average total cost of the firm?</h3>

The average total cost is the sum of the average fixed cost and the average variable cost.

The average total cost = average fixed cost + average variable cost

$25  + $50 = $75

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2 years ago
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U.S. trade with other nations is worth $4.9 trillion per year. China, Canada and Mexico are the country’s largest trading partners, accounting for nearly $1.9 trillion worth of imports and exports. But this landscape could be reshaped as President Trump pursues “America First” policies and reworks free trade deals.

<h3>What is international trade?</h3>

International trade is the term for cross-border economic activity. Consumer products like televisions and apparel, capital goods like machinery, raw materials, and food are some of the things that are often traded. Other transactions involve services, like payments for foreign patents and travel services (see service industry). International financial payments, in which the private banking sector and the central banks of the trading nations play key roles, promote international trade transactions.

International trade and the associated financial transactions are typically carried out to give a nation the commodities it lacks in exchange for the abundant commodities it produces; these transactions, when combined with other economic policies, tend to raise the standard of living in a given country.

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Explanation:

The store should keep a track in the system for the purchase of items from its customers. The store should get approval before purchasing the product and the cash dealing should be assigned to designated person who will be responsible for the payment to its customers. This will reduce chances of fraud as the cash will be handled by only one person and tracking will be easy.

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