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Rasek [7]
3 years ago
13

A project will produce an operating cash flow of $31,200 a year for 7 years. The initial fixed asset investment in the project w

ill be $204,900. The net aftertax salvage value is estimated at $92,000 and will be received during the last year of the project's life. What is the net present value of the project if the required rate of return is 11 percent

Business
1 answer:
harina [27]3 years ago
5 0

Answer: $13,573.03

Explanation:

The Net Present Value of a project refers to the present value of the Cash Outflows subtracted from the present value of Cash Inflows.

It helps to check the viability of a product to see if it should be embarked on.

Cash Outflow = $204,900 which is the initial investment

Cash Inflows = Present value of $31,200 paid every year as well as the Present Value of the Salvage value of $92,000

Present Value of $31,200 annually.

Since this is a constant cashflow, it can be treated as an Annuity.

To make the calculation of an annuity faster, there exist Present Value Annuity factors that can be Multiplied with the Amount to find the present value. I have attached a table showing it.

The PVIFA for a 7 year project with an 11% discount rate is,

= 4.712

Present Value of the Inflow is therefore,

= 31,200 * 4.712

= $147,014.4

Present value of the Salvage Value is

= 92,000 / ( 1 + 11%) ^ 7

= $44,312.57

The Net Present Value is therefore,

= 147,014.40 + 44,312.57 - 204,900

= -$13,573.03

Net Present Value is a loss of ($13,583.03).

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navik [9.2K]

Answer:

produce at an economic loss.

Explanation:

In a perfect competition, there are many buyers and sellers of homogeneous products, and there is free entry and exit in the market.

This simply means that, in a perfectly competitive market, there are many buyers and sellers (price takers) of homogeneous products (standardized products with substitute) and the market is free (practically open) to all individuals or business entities that are willing to trade all their goods and services.

In a perfectly competitive market in long-run equilibrium, a long-run equilibrium avails firms the opportunity to adjust all inputs and all fixed costs are maximized. Also, it's characterized by free entry and exit, as such there isn't a fixed number of firms. This simply means that, since the number of firms in a long-run equilibrium can change, a firm must exit the market as a result of losses i.e when the firm is unable to cover its fixed costs in the long-run while new firms are allowed entry into the market when it anticipates potential profits or gains.

However, the firms always strive to maximize profits by increasing their level of output, such that P = MC. Also, the firms wouldn't be willing to leave or enter into the market because they are not making any profit, such that P=AC.

In a nutshell, in the long run equilibrium P=MR=MC and P=AC.

Hence, if price is greater than average variable cost and less than average total cost at the profit-maximizing quantity of output in the short run, a perfectly competitive firm will produce at an economic loss.

Additionally, Average Total Cost (ATC) can be defined as the overall cost of production divided by total output of production. It is calculated by dividing total cost by total output of production or by adding TVC and TFC.

8 0
3 years ago
A perfectly competitive firm faces a __________ demand curve. Group of answer choices upward sloping downward-sloping perfectly
qwelly [4]

A perfectly competitive firm faces a downward-sloping demand curve.

<h3>What is demand curve?</h3>

It is a visual illustration of the connection between product pricing and demand-side quantity. The graph is built with amount demanded on the horizontal axis and price on the vertical axis.

Demand curve has two types-

  • individual demand curve: The quantity that a specific household wants at different prices is represented by a demand curve for that particular household. The graphic representation of the individual demand schedule is another way to describe it. It can be created by analyzing consumer behavior in response to price changes.
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<h3>What is downward-sloping demand curve?</h3>

A demand curve demonstrating how demand declines as price rises.

The price elasticity of demand is always negative for a downward-sloping demand curve since the price and quantity requested move in the opposite directions.

To know more about the demand curve, here

brainly.com/question/1139186

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5 0
2 years ago
What is a credit limit? AThe required payment to your credit card company. BHow many credit cards you can own. CThe amount of in
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B how many credit cards you can own
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3 years ago
A groundskeeper must buy bags of fertilizer. Each bag treats $10000$ square feet of ground and costs $\$27$. The groundskeeper c
castortr0y [4]

Answer:

$162

Explanation:

As we know that

1 square feet = 0.1 square yard

which means

10,000 square feet = 0.1 × 10,000

                                = 1,000 square yards

And, the given cost is $27

So, the cost for 6,000 square yards would be

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= ($162,000) ÷ (1,000 square yard)

= $162

We applied the unitary method for above calculation.

5 0
3 years ago
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Maslowich

Answer:

fixed price contract

Explanation:

Based on the information provided within the question it can be said that the neighbor most likely transferred risk with a fixed price contract. This refers to a contract that whose price is fixed at a set amount which does not depend on resources or time spent to complete the contract. Therefore it does not matter how much time or money the painter has to spend on tools, he must complete by the terms of the contract for the $1500 that were agreed upon.

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