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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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Answer:

                                The sales budget    

          Jefferson Sports Medicine, Inc budgets sales budget (Amounts in $)

                                                              Months                            

Physical examination    July           August         September   Total

Basic physical               13,200       14,100           6,300           33,600

Extended physical        25,650       27,000         14,850          <u>67,500</u>

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Explanation:

The sales expense shows the forecasted of sales from the various types of physical examination for a given period. These include the sales expected from Physical examination. The sales are the products of the charge per examination and the number of examinations conducted. It may be computed as follows;

July;

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August

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September

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Extended physical

= $135 * 110

= $14,850

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