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wariber [46]
3 years ago
8

Which of the following investments has a higher present​ value, assuming the same​ (strictly positive) interest rate applies to

both​ investments? Year Investment X Investment Y 1 ​$5,000 ​$11,000 2 ​$7,000 ​$9,000 3 ​$9,000 ​$7,000 4 ​$11,000 ​$5,000
Business
1 answer:
Sladkaya [172]3 years ago
7 0

Answer:

Investment Y has a greater present value

Explanation:

present value is the sum of disoucnted cashflows

i would choose an interest rate of 10% to calcuate the present values

for investment X

cash flow in year 1 = $5,000

cash flow in year 2 = $7,000

cash flow in year 3 = $9,000

cash flow in year 4 = $11,000

I = 10%

PV = $24,605.56

or investment Y

cash flow in year 1 = $11,000

cash flow in year 2 =$9,000

cash flow in year 3 = $7,000

cash flow in year 4 = $5,000

I = 10%

PV = $26,112.29

Investment Y has a greater present value

To find the PV using a financial calculator:

1. Input the cash flow values by pressing the CF button. After inputting the value, press enter and the arrow facing a downward direction.

2. after inputting all the cash flows, press the NPV button, input the value for I, press enter and the arrow facing a downward direction.  

3. Press compute  

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The members of the group recommended 3,5,7 years as prison sentence individually but 10 years together. 10 years is more extreme when compared to the sentences recommended individually.

I hope my answer helps you.

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Sauber's washer-dryer is available in four stylish finishes: stainless steel, pearl white, gunite gray, and obsidian. Although t
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a and b

Explanation:

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6 0
3 years ago
Brewster’s is considering a project with a 5-year life and an initial cost of $120,000. The discount rate for the project is 12
Ket [755]

Answer:

NPV = $27,792

Explanation:

Net Present Value = Present Value of Future Cash Flows - Initial Investments

To compute the Present value of Future Cash Flows, we need to first compute the cash inflows during the life of the project:

Year 1: 2,100 * 20 = $42,000

Year 2: 2,100 * 20 = $42,000

Year 3: 2,100 * 20 = $42,000

The units of Year 4 and Year 5 are calculated as follows:

⇒ (0.5 * 1,400) + (0.5 * 2,500) = 1,950 units

Year 4: 1,950 * 20 = $39,000

Year 5: 1,950 * 20 = $39.000

Now, discount the cash inflows at a rate of 12% to calculate the Present Value of Future Cash Flows

⇒ <u>42,000 </u>+ <u>42,000</u>+ <u>42,000</u> + <u>39,000</u> + <u>39,000</u>

     (1.12)^1      (1.12)^2   (1.12)^3    (1.12)^4      (1.12)^5

⇒  37,500 + 33,482 + 29,895 + 24,785 + 22,130  

⇒ $147,792

Net Present Value = Present Value of Future Cash Flows - Initial Investments

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NPV = $27,792

3 0
3 years ago
Markland Manufacturing intends to increase capacity by overcoming a bottleneck operation by adding new equipment. Two vendors ha
Veseljchak [2.6K]

Answer:

Proposal A: 5,455 units

Proposal B: 5,770 units

Explanation:

The break-even point is the number of units required for the revenue to equal the total costs.

For proposal A:

Fixed Costs = $60,000

Variable Costs = $13 / unit

Selling Price = $24 / unit

(P-VC)*n-FC = 0\\(24-13)*n-60,000 = 0\\n=5,454.5\ units

For proposal B:

Fixed Costs = $75,000

Variable Costs = $11 / unit

Selling Price = $24 / unit

(P-VC)*n-FC = 0\\(24-11)*n-75,000 = 0\\n=5,769.2\ units

Rounding up to the next whole unit, the break-even points for proposal A and B, respectively, are 5,455 and 5,770 units.

3 0
3 years ago
Assume you purchased the right to sell 2,300 shares of JCPenney stock in November 2015 at a strike price of $9.00 per share. Sup
Gre4nikov [31]

Answer:

Put options give the holder the right to sell the underlying stock to the seller of the put option.

Put options are advantageous when the price in the market falls below the strike price of the option because the buyer will be able to sell at above market value and make a profit.

The asking price for a strike price of $9.00 is listed to be $0.33 and this is the premium paid by the buyer of the Put Option.

<h2>1. Return if stock sells for $8.00</h2>

= Amount received/ Amount spent

= (No. of shares * ((Strike price - Market price) - Premium paid) ) / (No. of share * premium)

= (2,300 shares * (($9.00 - 8.00) - 0.33))/ ( 2,300 * 0.33)

= 2.03

= 203 %

<h2>2. Return if stock sells for $10.00. </h2>

As this is an option, the investor can decide not to sell to the seller. The market price is higher than the strike price so they will not sell to the seller of the option and the return will be;

= (No. of shares * - Premium paid) ) / (No. of share * premium)

= (2,300 shares * - 0.33)/ ( 2,300 * 0.33)

= -1

= -100 %

4 0
3 years ago
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