Clemens Inc. is considering a $100 million investment in a new line of soft drinks. However, $100 million is a huge investment f
1 answer:
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Answer: D. 15%
Explanation:
The IRR is the discount rate that will make the Net Present Value to be 0.
In other words, the IRR is the discount rate that will make the cash inflow from the investment to be equal to the investment amount.
As the cashflow is constant, it is an annuity and so can be calculated by the Present Value Interest Factor.
Investment cost = $1,100,000
Using the options given;
Discount rate - 14%
Present Value of Cash inflow = 676,507 * Present Value of Annuity factor, 14%, 2 years
= 676,507 * 1.647
= $1,114,207.029
1,114,207.029 ≠ 1,100,000
Discount rate - 15%
Present Value of Cash inflow = 676,507 * Present Value of Annuity factor, 15%, 2 years
= 676,507 * 1.626
= $1,100,000.382
= $1,100,000
IRR is 15% as Present value of Cash inflow is equal to Investment cost at a discount rate of 15%.
Answer: hello your question is poorly structured attached below is the missing graph and missing part of the question
Assume the government imposes a $1.00 excise tax on the sale of every 2 liter bottle of soda. The tax is to be paid by the producers of soda. The figure below shows the annual market for 2 liter bottles of soda before and after the tax is imposed.
answer :
a) $2 , 4 billion
b) $2.5
c) $1.5
d) 3 billion
e) $3 billion
Explanation:
a) equilibrium price = $2 per bottle
equilibrium quantity = 4 billion bottles
<u>b) After imposition of excise tax </u>
consumers will pay = $2.5
<u>c) The amount producers keep after the imposition of taxes </u>
= $2.5 - tax
= 2.5 - 1 = $1.5
<u>d) New equilibrium quantity ( after tax is imposed ) </u>
= 3 billion bottles ( from graph attached ) i.e. intersection of S2 and D
e)<u> Amount of tax revenue collected by the government from the imposition of tax </u>
= quantity of bottles sold * $1
= 3 billion * $1 = $3 billion
