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DIA [1.3K]
3 years ago
15

A company is considering replacing its air conditioner. Management has narrowed the choices to alternatives that offer comparabl

e performance and considerable savings over their present system. The effective annual interest rate is 8%. What is the benefit-cost ratio of the better alternative?
Business
1 answer:
Naya [18.7K]3 years ago
4 0

Answer:

The benefit cost ratio of alternative 2 is 1.34

Explanation:

Initial cost $7000 $9000

Annual savings $1500 $1900

Salvage value $500 -$1250

Life 15 years 15 years

First, we calculate the present worth of Alternative 1 and 2, taking salvage value as a decrease in cost

.

For alternative 1

B1 = Benefits = ($1500)(P/A, 8%, 15) = ($1500)(8.5595) = $12,839

C1 = Cost = $7,000 – ($500)(P/F, 8%,15) = $7,000 – ($500)(0.3152) = $6842

Ratio of Benefit to Cost = Benefit/Cost = $12,839/$6842 = 1.88

For alternative 2

B2 = Benefits = ($1900)(P/A, 8%,15) = ($1900)(8.5595) = $16,263

C2 = Cost = $9000 + ($1250)(P/F,8%,15) = $9000 + ($1250)(0.3152) = $9394

Ratio of Benefit to Cost = Benefit/Cost = $16,263/$9394 = 1.73

Both alternatives can't be compared directly unless we perform incremental analysis on both.

Incremental Analysis =. (B2 – B1)/(C2 –C1) = ($16,263- $12,839)/ ($9394 - $6842) = 1.34

Incremental Analysis is greater than 1, so alternative 2 is better than alternative 1

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Bonds often pay a coupon twice a year. For the valuation of bonds that make semiannual payments, the number of periods doubles,
garik1379 [7]

Answer:

$876,205.93

Explanation:

Calculation for the value of the Treasury note

FV= 1,000,000

N=3*2

N=6

PMT=3%*1,000,000/2

PMT=30,000/2

PMT= 15,000

I/Y=7.7/2

I/Y= 3.85

Using financial calculator to find the present value of the treasury note

Present Value = $876,205.93

Therefore the present value of the treasury note will be $876,205.93

3 0
3 years ago
Financial institutions such as commercial banks, bond mutual funds, insurance companies, and pension funds maintain large portfo
inessss [21]

Answer:

The correct answer is letter "B": unfavorably; increases.

Explanation:

As a measure to control inflation in the economy, the Federal Reserve (Fed) tends to <em>increase </em>the interest rate. This to have banks request fewer loans from the central bank which will result in offering fewer credits to individuals. If people have fewer sources of debt, the possibilities that an economic bubble -<em>continuous increase in price due to continuous increase in demand</em>- appear decreases.

However, if people have fewer sources of debt, private investment decreases, causing an <em>unfavorable </em>panorama for financial institutions offering large portfolios of assets.

8 0
2 years ago
The ________ is a form of business organization that is rapidly gaining popularity in the United States. The concept originated
zvonat [6]

Answer:

Limited liability company

Explanation:

A limited liability company (LLC) is an hybrid entity United States in which the characteristics of corporations and partnerships are combines. In this strategy owners are not personally liable for the firm's debts.

I hope you find this information useful and interesting! Good luck!

6 0
3 years ago
Jonas doesn't want to keep his savings in an account because he doesn't want to pay bank fees. Which of the following is an argu
blsea [12.9K]

The correct answer is C. Money is safer in the bank.

Explanation:

The main point or position of Jonas is that savings should be kept in an account due to the costs associated with this. In this context, the only argument that refutes Jonas' position and it is directly related to the main point of Jonas is "Money is safer in the bank" because even if keeping savings in a bank requires to pay fees this guarantees the money will be safe, which does not occur if Jonas keeps his savings at home. Moreover, the safety factor makes the option of the bank better, which refutes Jonas position.

3 0
3 years ago
Larkspur Corporation manufactures drones. On December 31, 2019, it leased to Althaus Company a drone that had cost $104,800 to m
Lady_Fox [76]

Answer:

First find the present value of the lease. Payments are constant and fixed so this is an annuity. As it is to be paid from the beginning, it is an Annuity due.

= Annuity * Present value interest factor of annuity due, 5 years, 7%.

= 37,400 * 4.3872

= $164,081

Date                          Account Details                            Debit              Credit

Dec. 31, 2019            Lease Receivable                         $164,081

                                 Cost of goods sold                       $104,800

                                 Sales                                                                    $164,081

                                 Inventory                                                             $104,800

Date                          Account Details                           Debit                Credit

Dec. 31, 2019           Cash                                             $37,400

                                 Lease Receivable                                               $37,400

5 0
2 years ago
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