Answer:
Comment for statement A - The firm must still compare the IRR with the opportunity cost of capital when using the IRR rule. Therefore, even with the IRR method, the appropriate discount rate must still be specified.
Comment for statement B - There should be a higher discount rate on risky cash flows than the rate used to discount less risky cash flows.
Making use of the payback rule is equivalent to using the NPV rule with a zero discount rate for cash flows before the payback period and an infinite discount rate for cash flows thereafter.
Explanation:
a)
“I like the IRR rule. I can use it to rank projects without having to specify a discount rate”
The firm must still compare the IRR with the opportunity cost of capital when using the IRR rule. Therefore, even with the IRR method, the appropriate discount rate must still be specified.
b.
“I like the payback rule. As long as the minimum payback period is short, the rule makes sure that the company takes no borderline projects. That reduces risk”
There should be a higher discount rate on risky cash flows than the rate used to discount less risky cash flows.
Making use of the payback rule is equivalent to using the NPV rule with a zero discount rate for cash flows before the payback period and an infinite discount rate for cash flows thereafter.
Answer:
A) Offering 1/2 price discounts through Costco.
Explanation:
Probably the most commonly used and most effective sales promotion is to offer a discount to your products or services. Everyone loves the idea of paying less for a product they need or want. But there is a catch with this type of activity, you shouldn't do it very often. If discounts are offered on a regular basis, then customers will tend to purchase the product only when a discount is available.
The amount of annual depreciation by the straight-line method is $18,800.
<h3>Annual depreciation</h3>
a. Annual depreciation
Annual depreciation=[($80,000 - $4,800) ÷ 4]
Annual depreciation=$18,800
b. Annual depreciation
Year 1 Annual depreciation= 10% × $80,000
Year 1 Annual depreciation = $8,000
Year 2 Annual depreciation= 10% × ($75,000 - $7,500)
Year 2 Annual depreciation = $7,520
Therefore the amount of annual depreciation by the straight-line method is $18,800.
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If g = $800 billion, tax receipts = $850 billion, and there is an inflationary gap of $100 billion, there is a budget surplus.
Taxes are mandatory contributions levied on people or businesses by means of a government entity—whether or not nearby, local, or country-wide. Tax revenues finance authorities' sports, including public works and offerings consisting of roads and colleges, or programs which include Social Protection and Medicare.
The principal purpose of taxation is to elevate sales for the services and profits that help the network's desires. Public revenues ought to be good enough for that motive. 2. Tax should, as far as viable, be levied equitably, consistent with the potential to pay.
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Answer: 10%
Explanation:
When the price of a bond is at par, it means that the coupon rate and the Yield to Maturity are the same.
The Coupon rate is the interest rate that the Issuer of the bond pays the bond holders as a percentage of Par.
The Coupon payment here is $100 and the rate is;
= 100/1,000
= 10%
<em>Coupon Rate = 10% = Yield to Maturity </em>
