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lisov135 [29]
3 years ago
13

The following data pertain to an investment proposal: Required investment $75,000 Annual cash savings $18,000 Projected life of

investment 8 years Projected salvage value $4,000 Required rate of return 16% Ignoring income taxes, how much is the net present value of the proposed investment?
Business
1 answer:
ehidna [41]3 years ago
5 0

Answer:

Explanation:

Using a financial calculator, input the following using CF function;

Initial Investment ; CF0 = -75,000

Yr1 cashflow ; C01 = 18,000

Yr2 cashflow ; C02 = 18,000

Yr3 cashflow ; C03 = 18,000

Yr4 cashflow ; C04= 18,000

Yr5 cashflow ; C05 = 18,000

Yr6 cashflow ; C06 = 18,000

Yr7 cashflow ; C07 = 18,000

Yr8 cashflow ; C08 = 18,000 +4,000 = 22,000

Required rate of return = 16%

then compute Net present value by keying in NPV, CPT = $4,404.74

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1. Suppose that 10 years ago you bought a home for $150,000, paying 10% as a down payment, and financing the rest at 8% interest
Ierofanga [76]

Answer:

1. Down payment = $15,000

2. The existing mortgage (loan) was for $135,000

3. The current monthly payment on the existing mortgage is $990.58

4. The total interest over the life of the existing loan = $221,609.58

6. The amount of the original loan paid off is $22,319.

7. Total amount paid to the loan company over the last 10 years is $258,928.58 ($243,928.58 + $15,000)

8. Total interest paid over the last 10 years is $221,609.58

9. The equity in the home is $67,319 ($180,000 - $112,681)

10. The new monthly payments will be $675.58

11. Saving each month because of the lower monthly payment is $315 ($990.58 - $675.58)

12. Total Interest = $352,137.21 ($221,609.58 + $130,527.63)

13. It does not make sense to refinance because what is saved per month cannot compare with the additional interest expense to be incurred for prolonging the payments.

Explanation:

a) Data and Calculations:

1. Cost of a home = $150,000

10% down payment = $15,000

Existing Mortgage = $135,000 ($150,000 - $15,000)

Home Price  150000

 Down Payment  10 %

Loan Term  30  years

Interest Rate  8%

House Price $150,000.00

Loan Amount $135,000.00

Down Payment $15,000.00

Total of 360 (30 years * 12)

Mortgage Payments $356,609.58

Total Interest $221,609.58

Ten years after, the loan balance has been reduced by $22,319 ($135,000 - $112,682)

Refinancing calculations:

Home Price  112681

 Down Payment  0 %

Loan Term  30  years

Interest Rate  6

   

Monthly Pay:   $675.58 Monthly

Total Mortgage Payment $243,208.63

Total Out-of-Pocket $243,208.63

Total of 360 Mortgage Payments $243,208.63

Total Interest $130,527.63

 

4 0
3 years ago
In order to restrain the smaller competitors in the market, the company sells some of its products at very low prices. This is a
Aleks04 [339]

Answer:

Predatory pricing.

Explanation:

Predatory pricing is a strategy that is used by firms to gain customers, create barrier of entry from a market, or to drive competition out of the market. The firm prices it's products very low so that competitors cannot afford to sell at the same price.

This results in competitors going out of business. The result of predatory pricing is that there are few firms left in the industry, or there is establishment of a monopoly.

5 0
3 years ago
The real wages of workers will tend to be high when
DIA [1.3K]

Answer:

When labor productivity is high.

Explanation:

According to neoclassical economic theory, real wages are equal to the marginal product of labor (MLP). The marginal product of labor is the extra output produced by one extra unit of labor (one extra worker).

If the MPL is high, this means that workers are very productive, and therefore, are paid a high real wage accordingly.

This is why countries with high labor productivity like the U.S. or Switzerland also have very high real wages.

6 0
3 years ago
The manager of the bank where you work tells you that the bank has $300 million in deposits and $255 million dollars in loans. I
tigry1 [53]

Answer:

The bank is holding $19.5 million in excess reserves.

Explanation:

If the bank has $300 million is deposits and the reserve ratio is 8.5% then the bank needs to have minimum reserves of 8.5% of 300 million so the minimum reserves are 0.085*300 million = 25.5 million

How ever the actual reserves of the bank is the difference between deposits and loans. The deposits are 300 million and loans are 255 million so the actual reserves are 300 million-255 million= $45 million

Excess reserves is the difference between the actual reserves and the minimum reserves so 45 million - 25.5 million = 19.5 million.

4 0
3 years ago
Select all that apply Which of the statements below summarize why a seller would give a sales allowance? (Check all that apply.)
Varvara68 [4.7K]

Answer:

I. In order to entice a customer to keep damaged or defective merchandise, the seller is willing to decrease the selling price.

II. The seller wants to avoid future lost sales.

III. The seller wants to keep a customer happy.

IV. Sold merchandise was defective or unacceptable.

Explanation:

Sales allowance can be defined as a reduction in the price of goods that a seller gives to a customer due to quality issues, incorrect pricing, shipping, etc.

The statements which best summarize why a seller would give a sales allowance are;

I. In order to entice a customer to keep damaged or defective merchandise, the seller is willing to decrease the selling price.

II. The seller wants to avoid future lost sales.

III. The seller wants to keep a customer happy.

IV. Sold merchandise was defective or unacceptable.

5 0
3 years ago
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