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trasher [3.6K]
3 years ago
14

You run a construction firm. You have just won a contract to build a government office complex. Building it will require an inve

stment of $10.2 million today and $5.1 million in one year. The government will pay you $21.5 million in one year upon the building's completion. Suppose the interest rate is 10.1%. a. What is the NPV of this opportunity? b. How can your firm turn this NPV into cash today? a. What is the NPV of this opportunity? The NPV of the proposal is $ ______________ million. (Round to two decimal places.) b. How can your firm turn this NPV into cash today? (Select the best choice below.) A. The firm can borrow $15.3 million today and pay it back with 10.1% interest using the $21.5 million it will receive from the government. B. The firm can borrow $15.3 million today and pay it back with 10.1% interest using the $19.53 million it will receive from the government. C. The firm can borrow $19.53 million today and pay it back with 10.1% interest using the $21.5 million it will receive from the governmenD. The firm can borrow $24.16 million today and pay it back with 10.1% interest using the $21.5 million it will receive from the governmen
Business
1 answer:
prisoha [69]3 years ago
4 0

Answer:

The NPV of the proposal is $4.7 million.

b. How can your firm turn this NPV into cash today?

  • C. The firm can borrow $19.53 million today and pay it back with 10.1% interest using the $21.5 million it will receive from the government

Explanation:

year                               net cash flows

0                                       -$10.2 million

1                                         $16.4 million

discount rate 10.1%

NPV = -$10.2 million + $16.4 million / 1.101 = -$10.2 million + $14.9 million = $4.7 million

the PV of the $21.5 million government payment = $21.5 / 1.101 = $19.53 million

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A+piece+of+land+produces+an+income+that+grows+by+5%+per+annum. +if+the+first+year’s+income+is+$10,000,+what+is+the+value+of+the+
Aleonysh [2.5K]

If a piece of land produces an income that grows by 5% per annum. The value of the land is $200,000.

<h3>Present value of the land</h3>

Using this formula

Present value=Income/Rate per annum

Let plug in  the formula

Present value=$10,000/0.05

Present value=$200,000

Therefore If a piece of land produces an income that grows by 5% per annum. The value of the land is $200,000.

Learn more about Present value of land here:brainly.com/question/14958247

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6 0
2 years ago
Hunter Sailing Company exchanged an old sailboat for a new one. The old sailboat had a cost of $210,000 and accumulated deprecia
dezoksy [38]

Answer: Gain of $12,000

Explanation:

First off, what was the Net book value of the old sailboat?

= Cost Price - Accumulated Depreciation

= 210,000 - 84,000

= $126,000

They paid $101,000 in cash and received a trade in allowance of $138,000 bringing the value to $239,000.

What they should have received as the trade in allowance was the NBV of $126,000. Since they didn't they got a gain of,

= 138,000 - 126,000

= $12,000

Because this transaction has commercial substance, the gain would be $12,000.

6 0
3 years ago
Big John’s manufacturing currently produces its lead product on a machine that has a variable cost of 0.32 per unit and a fixed
Greeley [361]

Answer:

The indifference point is 1,875,000 units.

Because the current machine has lower fixed costs, it has a lower cost from 0 units to 1,874,999. From 1,875,001 the new machine is more convenient,

Explanation:

Giving the following information:

Current machine:

Total cost= 75,000 + 0.32x

New machine:

Total cost= 150,000 + 0.28x

<u>To find the indifference point, we need to equal the cost functions and isolate x (number of units)</u>

75,000 + 0.32x = 150,000 + 0.28x

0.04x= 75,000

x= 1,875,000

The indifference point is 1,875,000 units.

Because the current machine has lower fixed costs, it has a lower cost from 0 units to 1,874,999. From 1,875,001 the new machine is more convenient.

6 0
3 years ago
A magazine publisher asks you to commit to a brief trial subscription. having committed to the trial subscription, you may be mo
Aneli [31]
Idk bro I'm just answering this for points
5 0
3 years ago
Peter Company acquired 75 percent of Sally Company on January 1, 2019 for $712,500. During 2019, Sally purchased inventory for $
dezoksy [38]

Answer:

Journal entry to eliminate Sale to Peter Company

Debit : Sales Revenue (Sally Company ) $50,000

Credit : Cost of Sales (Peter Company) $50,000

Explanation:

Peter Company and Sally Company are in a group and Peter Company is the Parent whilst Sally Company is the subsidiary.

For 2019 Eliminate an Intragroup Transactions that occur between Peter Company and Sally Company.

8 0
3 years ago
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