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Harlamova29_29 [7]
4 years ago
8

Mary is in contract negotiations with a publishing house for her new novel. She has two options. She may be paid $100,000 up fro

nt, and receive royalties that are expected to total $26,000 at the end of each of the next five years. Alternatively, she can receive $200,000 up front and no royalties. Which of the following investment rules would indicate that she should take the former deal, given a discount rate of 8%?
Rule I: The Net Present Value rule
Rule II: The Payback Rule with a payback period of two years
Rule III: The internal rate of return (IRR) Rulea. Rule I onlyb. Rule III onlyc. Rule II and III onlyd. Rule I and II only
Business
1 answer:
Mazyrski [523]4 years ago
5 0

Rule I is correct.

<u>Explanation:</u>

Year Cash flow Pv at 8% Discounted cash flow

0           100000              1         100000

1            26000              0.9259 24074.074

2            26000               0.8573 22290.809

3             26000         0.7938 20639.638

4             26000      0.7350 19110.776

5             26000       0.6806 17695.163

From the above calculation, the net present value is $203810.46

          Option 1   Option 2

NPV 203810.5 200000

Payback    5 years   0 years

IRR             No IRR No IRR

NPV (Net present value) option say that former would be selected

So, answer is Rule I only.

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5 0
4 years ago
Creative Sound Systems sold investments, land, and its own common stock for $32.0 million, $15.2 million, and $40.4 million, res
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Answer:

Net cash flow from investing activities is $47.2 million -$58.6 million =-11.4 million.

Explanation:

Draft Cashflow Statement.

Operating Activities; $0.0 million

Investing Activties;

Cash Inflows;

Sales of ; investment $32.0 million,plus sales of Land $15.2 million =$47.2 million.

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Net cash flow from investing activities is $47.2 million less $58.6 million=-11.4 million.

Financing Activities;

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4 0
4 years ago
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Answer:

B

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You want a good impression with people and you also need people to help you along the way

3 0
3 years ago
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8 0
3 years ago
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Answer:

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