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Liula [17]
3 years ago
6

Beyer Company is considering the purchase of an asset for $180,000. It is expected to produce the following net cash flows. The

cash flows occur evenly within each year. Year 1 Year 2 Year 3 Year 4 Year 5 Total Net cash flows $ 60,000 $ 40,000 $ 70,000 $ 125,000 $ 35,000 $ 330,000 Compute the payback period for this investment. (Cumulative net cash outflows must be entered with a minus sign. Round your Payback Period answer to 2 decimal place.)
Business
1 answer:
Rzqust [24]3 years ago
5 0

Answer:

The payback period for this investment is 3.08 years.

Explanation:

Payback Period: The payback period is that period which shows that in which year or in which period, the investment amount should be recovered.

For computing the payback period, first we have to calculate the total of yearly cash flows which is equal to the initial investment. If it is not equal or less than, so difference is taken which is divided by next year cash inflows.

The formula is shown below:

= Approximate Years in which the amount is recovered + Difference ÷ Next year cash-flows

where,

Initial investment = $180,000

Year 1 cash inflow = -$60,000

Year 2 cash inflow = -$40,000

Year 3 cash inflow = -$70,000

Year 4 cash inflow = -$125,000

Year 5 cash inflow = -$35,000

Now, sum of year 1 + year 2 + year 3 cash flows = $60,000 + 40,000 + 70,000 gives the 170,000 amount

So,

In 3 year, the 170,000 amount is recovered. For accurate results we proportionate the difference with next year cash flows

In mathematically,

= 3 + (180,000 - 170,000) ÷ $125,000

= 3 + $10,000 ÷ $125,000

= 3 + 0.08

= 3.08 year.

Hence, the payback period for this investment is 3.08 years.

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The marketplace is full of both potential and non-potential customers which makes this statement <u>True</u>.

<h3>Are both potential and non-potential customers in the market?</h3>

The market does indeed have both potential customers for a product and non-potential customers who would not want to buy the product.

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1 year ago
gomez runs a small pottery firm. he hires one helper at $11,000 per year, pays annual rent of $6,000 for his shop, and spends $2
7nadin3 [17]

For a poetry farm, the capital gain is $70,000 while the economic profit is $6,000.

<h3>Why does accounting profit exist?</h3>

The owner's profit, or company profit, is what is meant by accounting profit. This profit may be obtained by totaling all business income and deducting specified costs from the total. The explicit cost in this context refers to expenses spent in the course of operating the firm, such as rent paid, labor costs paid, materials acquired, etc.

<h3>Briefing:</h3>

Accounting costs = Helper cost + Annual rent + materials = $(11,000 + 6,000 + 22,000) = $39,000

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7 0
1 year ago
Bond Yields and Rates of Return A 30-year, 10% semiannual coupon bond with a par value of $1,000 may be called in 4 years at a c
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Answer:

The bond's yield to maturity is 9.45% using Excel to get exact values, and 9.59% using approximate method.

Explanation:

We can calculate is using 2 ways, using Excel to get the exact percentage or with approximate methods, calculating the semi-annual Yield to Maturity using the following formula

YTM_{sm} =\cfrac{PMT+\cfrac{FV-PV}n}{\cfrac{FV+PV}2}

And from there we can calculate the Yield to Maturity just by multiplying the semi-annual one by 2.

Identifying the given information.

We have a period of 30 years, so for the semiannual bond we have n=2(30) = 60 periods.

The face value, FV, is $1000, the coupon rate is 0.10, thus we can use them to  find the interest per period PMT.

PMT=0.10 \times \cfrac{1000}{2}\\PMT=\$ 50

The current price of the bond, PV is $1050.

Replacing the values on the semiannual Yield to Maturity

YTM_{sm} =\cfrac{PMT+\cfrac{FV-PV}n}{\cfrac{FV+PV}2}

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Simplifying we get

YTM_{sm}=4.797\%\\

Finding the Yield to Maturity.

We can just multiply by 2 to get the Yield to Maturity from our previous result and rounding it to 2 decimals we get

YTM = 2 YTM_{sm}\\YTM=9.59\%

Alternatively we can use Excel and write:

RATE(n, PMT, PV, FV)*2

That is

RATE(60,50,1050,1000)*2

And we will get the exact Yield to maturity 9.49%

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