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
Harlamova29_29 [7]
3 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]3 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.

You might be interested in
Noreen is deciding whether to purchase Sport-Ease sneakers or a store brand. She has purchased other Sport-Ease shoes in the pas
Masja [62]

Answer:

C. greater perceived value.

Explanation:

.................

6 0
3 years ago
An investor purchases a 15-year, $1,000 par value bond that pays semiannual interest of $50. If the semiannual market rate of in
bearhunter [10]

Answer:

The answer is $862.35

Explanation:

Explanation:

This is a semiannual paying coupon, meaning interest are paid twice in year.

N(Number of periods) = 30periods ( 15 years x 2)

I/Y(Yield to maturity) = 6 percent

PV(present value or market price) = ?

PMT( coupon payment) = $50

FV( Future value or par value) = $1,000.

We are using a Financial calculator for this.

N= 30; I/Y = 6; PMT = 50; FV= $1,000; CPT PV= -862.35

Therefore, the market price of the bond is $862.35.

5 0
3 years ago
can you help me make a timeline, of becoming a wildlife biologist here's the first two but i need a few more timelines to when I
Reptile [31]

Answer:take the arrow and put it on the end and then start going back

Explanation:

this is the thing

6 0
3 years ago
A factory costs $460,000. You forecast that it will produce cash inflows of $150,000 in year 1, $210,000 in year 2, and $360,000
max2010maxim [7]

Answer:

Explanation:

a.Present value of inflows=cash inflow*Present value of discounting factor(rate%,time period)

=150,000/1.12+210,000/1.12^2+360,000/1.12^3

=557580.18

NPV=Present value of inflows-Present value of outflows                  

=557580.18-460,000

=$97580.18(Approx)=Value of factory

b.Hence since net present value is positive;factory is a good investment

(Yes)

7 0
2 years ago
Which button in the Print Preview tab allows users to set specific margins on the page of a report?
Irina-Kira [14]

Answer:

Page Setup

Explanation:

Page set up allows users to determine how a print out will appear. The user can customize the page size and layout. The page setup dialog box is available under the Layout tab in the Ribbon menu.

Page layout makes it possible for users to set the print parameters. These parameters include paper size,  page orientation, page margins, and quality of the print.

6 0
2 years ago
Other questions:
  • When using the book value of equity, the debt to equity ratio for Luther in 2018 is closest to: A) 0.43 B) 2.29 C) 2.98 D) 3.57
    6·1 answer
  • Clarespharm, a pharmaceutical company, wants to be the market leader in the country of Jefnamia by the end of the next fiscal ye
    11·1 answer
  • The percentage of the original loan amount that is paid in interest is called the:
    7·1 answer
  • What is the best way to judge the success of your communication? How quickly the message is developed Use of jargon Through feed
    15·1 answer
  • Smith &amp; Sons, Inc., is authorized to issue one million shares of $1 par value common stock. The company actually sells 500,0
    13·1 answer
  • Calculate the risk-adjusted asset base for a bank with: a. Cash of $20 million, 0% b. Gen. Obligation municipal security of $100
    9·1 answer
  • Match each of the categories of inventory with the right supported function. Production maintenance, repair, and other activitie
    12·1 answer
  • Managers choose the manufacturing location for each product based on where the best combination of cost, quality, and technology
    9·1 answer
  • Gilmore, Inc., had equity of $145,000 at the beginning of the year. At the end of the year, the company had total assets of $210
    11·1 answer
  • A company sold equipment that originally cost $280,000 for $140,000 cash. the accumulated depreciation on the equipment was $140
    6·1 answer
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!