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Nataly [62]
3 years ago
14

Ang Electronics, Inc., has developed a new DVDR. If the DVDR is successful, the present value of the payoff (when the product is

brought to market) is $33.5 million. If the DVDR fails, the present value of the payoff is $11.5 million. If the product goes directly to market, there is a 50 percent chance of success. Alternatively, Ang can delay the launch by one year and spend $1.25 million to test market the DVDR. Test marketing would allow the firm to improve the product and increase the probability of success to 80 percent. The appropriate discount rate is 11 percent. Calculate the NPV of going directly to market and the NPV of test marketing before going to market.(Enter your answers in dollars, not millions of dollars, i.e. 1,234,567. Do not round intermediate calculations and round your final answers to nearest whole dollar amount. (e.g., 32))
Business
1 answer:
omeli [17]3 years ago
4 0

Answer:

The NPV of going directly to market and the NPV of test marketing before going to market is $22.5 million and  $24.97 million respectively

Explanation:

The computation of the NPV of going directly to market is shown below:

=  Present value of the payoff i.e market × success percentage + Present value of the payoff × failure percentage

= $33.5 million × 50% + $11.5 million × 50%

= $16.75 million + $5.75  billion

= $22.5 million

And, The computation of the NPV of going directly to market is shown below:

=  (Present value of the payoff i.e market × success percentage + Present value of the payoff × failure percentage) ÷ ( 1 + discount rate) - spending amount

= ($33.5 million × 80% + $11.5 million × 20%) ÷ ( 1 + 0.11) - $1.25 million

= ($26.80 million + $2.30  million) ÷ (1.11) -  $1.25 million

= ($29.10 million) ÷ (1.11) -  $1.25 million

= $24.97 million

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It is May 1. The quoted price of a bond with a 30/360 day count and 12% per annum coupon in the United States is 105. It has a f
larisa86 [58]

Answer: option A is the correct option.

Cash price = 106.00

Explanation:

Cash price = quoted price + accrued interest

CP = Qp + I ..........................(1)

Quoted price = 105

Accrued interest = ?

STEP1 : FIND INTEREST;

Because the interest is not compounded

Accrued Interest = PRT ..........(2)

P= principal ( the face value)

R = rate per annum

T= period

P= 100

Since the period of payment of the face value was from April 1 to October 1 that means the period is 180 days, that means the 12% rate per annum (360 days), should be 6% rate per halve annum (180 days).

Therefore;

R = 6%

Since rate is applied every 30 days of the period which is 30/360 for an annum. Our period is 180 that's means rate will be applied to 30/180.

Therefore;

T = 30/180

Therefore using equation 2

I = 100 × 6% × (30/180) = 1.00

Accrued interest= 1.00

STEP 2: FIND CASH PRICE

using equation 1

Cash price = 105 + 1.00 = 106.00

4 0
3 years ago
There are zero coupon bonds outstanding that have a YTM of 5.97 percent and mature in 19 years. The bonds have a par value of $1
Fed [463]

Answer:

market price = $1,104.20

Explanation:

yield to maturity of zero coupon bonds = (face value / market price)¹/ⁿ - 1

  • YTM = 5.97%
  • n = 19 x 2 = 38
  • face value = $10,000

(face value / market price)¹/ⁿ = YTM + 1

face value / market price = (YTM + 1)ⁿ

market price = face value / (YTM + 1)ⁿ

market price = $10,000 / 1.0597³⁸ = $10,000 / 9.0563 = $1,104.20

8 0
3 years ago
After the delivery of the condominium documents in the TREC Residential Condominium Contract the buyer may terminate the contrac
sweet-ann [11.9K]

Answer:

The buyer would have a 12-day option to terminate the contract. Otherwise, he or she might not have any other option than to stick to the contract. (That is, the buyer will not have the unrestricted right to terminate the contract again.)

Explanation:

7 0
2 years ago
You are going to write an essay on the policies to reduce income inequality and poverty. You will explain the content of these p
spin [16.1K]

Answer:

The Essay is written as below; Kindly look into.

Explanation:

What is the main difference Between Income Inequality and poverty?

First of all we need to see the main difference between Income Inequality and Poverty. Poverty is a term which is used to measure the basic standard of living of individuals in the country while Income inequality is the unfairness in the distribution of income among various individuals living in an economy. It is ratio of percentage of income to the percentage of population.

Policies to reduce income in quality and poverty

We now explain certain policies to reduce income in equality and poverty. Following are some factors of polices taken to reduce income inequality and poverty.

1. Increase the minimum wage.

Normally the minimum wages is defined as “the minimum amount of remuneration that an employer is required to pay wage earners for the work performed during a given period, which cannot be reduced by collective agreement or an individual contract. The minimum wage in any economy is designed to create a minimum standard of living to protect the health and well-being of employees. The government could increase the national minimum wage. This is an effective way of increasing the incomes of the low paid and therefore reducing wage inequality.

2. Expand the Earned Income Tax.

The policies which  encourages the higher savings rates and lower the cost of building assets for working and middle class households can provide better economic security for struggling families. Access to fair, low-cost financial services and home ownership are also important pathways to wealth. Strong evidence shows that the earned income tax  has been an effective tool to increase work and reduce poverty.

4. Invest in education.

There are differences in early education and school quality which are the most important components contributing to persistent inequality. Timely Investments in education, beginning in early childhood with programs can increase economic mobility, contribute to increased productivity and decrease inequality. AS poverty affects education and our children living in poverty tend to be exposed to more stress, more intense & longer lasting stress that negatively impact attention, focus, cognition, IQ and social skills.

In the underdeveloped countries and developing countries, people instinctively know that education is a good thing for their children, and in developed countries, we have a lot to learn and to relearn about the importance of education. People who live in poverty are aware of the fact that sending their children to school will give them opportunities that they didn't have.  

5. Progressive Taxes.

A progressive tax imposes a higher rate on the wealthy than on the poor. It's based on the taxpayer's ability to pay. Poor families spend a larger share of their incomes on cost of living expenses. They need all the money they earn to purchase and pay for basics like shelter, food, and transportation. A tax decreases their ability to afford a decent standard of living by subtracting from their income.The wealthy can afford the basics. A tax decreases their ability to invest in stocks, add to retirement savings, or purchase luxury items.

Conclusion and Comparative Assessment

We need to evaluate each of these policies mentioned above, if wisely implemented, has the potential to lift the working families out of poverty. It will support greater economic mobility and reduce the inequality rise and growth. All of these policies could be endorsed at the local, state and federal levels if there is political will.  The question arises

<em>How does income inequality affect poverty? </em>

Both of these factor; Inequality and poverty affect each other directly and indirectly through their relation with economic growth. Poverty can be reduced through increases in income, like changes in the income distribution, or through a combination of both. It is however clear that both concepts are related, but neither replaces the other.” Therefore, it can be conditional that inequality exists because there is private property or clearly established hierarchies. But there are areas where inequality is unavoidable. If policymakers at the state level are deeply concerned about reducing poverty in their countries, they should start by reducing or limiting inequalities in the society.  

4 0
3 years ago
You are the CFO of a major pharmaceutical firm. A division manager has presented senior management with an investment opportunit
DochEvi [55]

Answer: $2.1 million

Explanation:

It is mentioned the project is independent of the outcome of general market  which means that

=> beta = 0

Using the CAPM formula which is,

r=rt + B* (rm -rf)

=> r = 3% + 0*(12%-3%) = 3%

Expected value of Project in one year = $1 billions * 0.1

Expected value of Project in one year = $100 millions

NPV = Expected value of Project in one year/ (1 + 0.03) - Initial cost

NPV = 100/ (1 + 0.03) - 95

NPV = 97.1 - 95

NPV = $2.1 million

4 0
3 years ago
Read 2 more answers
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