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Oduvanchick [21]
3 years ago
9

The owners of a chain of​ fast-food restaurants spend $ 25 million installing donut makers in all their restaurants. This is exp

ected to increase cash flows by $ 10 million per year for the next five years. If the discount rate is 6​%, were the owners correct in making the decision to install donut​ makers?
Business
1 answer:
RideAnS [48]3 years ago
4 0

Answer:

yes as it net present value is $24.17 million

Explanation:

In this question we have to find out the net present value which is shown below

              (In millions)                                            (In millions)

Year Cash flows Discount rate 6% PV of cash inflows  

0            -$25                     1                          -$25  (A)

1              $10                  0.9434                   $9.43

2              $10                   0.8900                   $8.90

3               $10                   0.8396                   $8.40

4              $10                   0.7921                   $7.92

5             $10                    0.7473                   $7.47

6             $10                    0.7050                    $7.05

Present value                                       $49.17   (B)

Net present value                              $24.17  (A - B)

As we can see that the net present value comes in positive which means it generated the return in near future so the decision should be yes

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Answer:

Combined Beta =  1

Combined return = 10%

Explanation:

given data

stock portfolio = $50,000

beta = 1.2

expected return = 10.8%

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expected return = 9.2%

standard deviation = 25%

to find out

combination

solution

we get here first Combined Beta that is express as

Combined Beta = 1.2 × 50% + 0.8 × 50%

Combined Beta =  1

and

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Combined return = 10.8 × 50% + 9.2 × 50%

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5 0
3 years ago
Following are transactions for Vitalo Company. Nov. 1 Accepted a $12,000, 180-day, 8% note from Kelly White in granting a time e
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Answer:

Interest amounts at December 31st = $80

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6 0
3 years ago
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The manager for a growing firm is considering the launch of a new product. If the product goes directly to market, there is a 40
julia-pushkina [17]

Answer:

1. Calculate the NPV for each option available for the project. (Do not round intermediate calculations. Enter your answers in dollars, not millions of dollars, e.g. 1,234,567.)

  • go to market now = $744,000
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  • consulting firm = $916,000

2. Which action should the firm undertake?

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Explanation:

expected payoffs:

  • option 1 (go to market now) = (40% x $1.86 million) + 0 = $744,000
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5 0
3 years ago
uzz Appliances manufactures two products: Food Processors and Espresso Machines. The following data are available: ​ Food Proces
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Answer:

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\left[\begin{array}{ccc}&$processors&$espresso\\$Sales&155&245\\$Variable&90&180\\$CM&65&65\\$Constrain resource usage&0.5&0.333\\$CM per constrain&130&195\ \end{array}\right]

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