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Maurinko [17]
3 years ago
15

Assume a machine that has a useful life of only one year costs $2,000. Assume, also, that net of such operating costs as power,

taxes, and so forth, the additional revenue from the output of this machine is expected to be $2,300. If the firm finds it can borrow funds at an interest rate of 10 percent, the firm should _________.A. not purchase the machine because the interest rate exceeds the expected rate of return. B. purchase the machine because the interest rate exceeds the expected rate of retum. C. not purchase the machine because the expected rate of return exceeds the interest rate. D. purchase the machine because the expected rate of return exceeds the interest rate.
Business
1 answer:
erik [133]3 years ago
5 0

Answer:

purchase the machine because the expected rate of return exceeds the interest rate.

Explanation:

Given the cost of machine = $2000

If the firm borrows fund at an interest rate of 10% to buy the machine,

Interest paid on the cost of machine = 10% of $200

= 10/100 × $2000

= $200

Total amount that must be paid back for the machine by the firm = actual cost of machine + interest rate

= $2000 + $200

= $2,200

Since the additional revenue generated from the machine after all operating cost = $2,300

Profit accrued by the firm = Revenue - (actual cost of machine + interest)

Profit accrued by the firm = $2,300-$2200

Profit accrued by the firm on the machine = $100

Based on the profit margin, it can be concluded that the firm can purchase the machine because the expected rate of return exceeds the interest rate.

Note that the expected rate of return is $300 (i.e $2300 - $2000) and the interest rate of is $200 (i.e 10% of $2000)

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The Parks and Recreation Department of Burkett County estimates the initial cost of a river park to be $2,200,000, annual upkeep
asambeis [7]

Answer:

B/E ratio 1.2356

Explanation:

B/E = \frac{PV \: cash-flow}{initial \: cost\: + operating \: cost \: PV}

300,000 - 43,000 = 257,000

257,000/0.04 = 6,425,000

initial cost 2,200,000

unkeep cost 120,000/0.04 = 3,000,000

6,425,000/(2,200,000+3,000,000) = 1.235576923

Note we are given a discount rate, which means the upkeep, benefits and disbenefits are perpetual.

4 0
3 years ago
in contrast, the lincoln company is closely held and, therefore, cannot generate reliable inputs with which to apply the capm me
d1i1m1o1n [39]

Outstanding bonds are currently yielding 8.42%, and the firm’s analysts estimate that the risk premium of its stocks over its bonds is currently 1.48%. as result, lincoln’s cost of internal equity = 9.9

Cost of equity = Bond's yield + risk premium

Internal equity, in its simplest form, refers to how employees in a firm who hold comparable roles or possess comparable skill sets are paid, whether through salaries or other perks associated with the job. Internal equity, then, is about equal pay for equal work.

Stock in the context of finance refers to the shares into which ownership of a corporation or company is divided.

[1] (In particular, the term "stocks" is also used to describe shares in American English.) A single share of stocks represents a portion of the corporation's ownership in relation to the total number of shares.

Learn more about Internal equity here :

brainly.com/question/14100571

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8 0
1 year ago
1. Calculate GDP loss if equilibrium level of GDP is $10,000, unemployment rate 9.8%, and the MPC is 0.75.
Mars2501 [29]

Answer: 860

Explanation:

The gross domestic product is the value of the goods and services which are produced in a particular country from the year.

In this question, we are informed that we should calculate GDP loss if equilibrium level of GDP is $10,000, unemployment rate 9.8%, and the marginal prospensity to consume is 0.75.

The GDP loss will be calculated as:

= [(0.75 × 9.8)/100 × 10,000] + 125

= [(7.35/100) × 10000] + 125

= [(0.0735) × 10000] + 125

= 735 + 125

= 860

6 0
4 years ago
Balance Sheet
miv72 [106K]

Answer:

Dynamic Weight Loss Co.

DYNAMIC WEIGHT LOSS CO.

Classified Balance Sheet as of June 30, 20Y7

Assets

Current Assets:

Cash                                                     $119,630

Accounts Receivable                              26,100

Prepaid Insurance                                    8,400

Prepaid Rent                                            6,000

Supplies                                                   11,200

Total current assets                            $171,330

Long-term Assets:

Land                                                     375,000

Equipment                          325,900

Accumulated Depreciation (32,600) 293,300

Total long-term assets                     $668,300

Total assets                                      $839,630

Liabilities and Equity

Current Liabilities:

Accounts Payable                              $10,830

Salaries Payable                                    7,500  

Unearned Fees                                   21,000

Total current liabilities                     $39,330

Equity:

Common Stock                                180,000  

Retained Earnings                          620,300

Total equity                                  $800,300

Total liabilities and equity           $839,630

Explanation:

a) Data and Calculations:

Trial Balance as of June 30, 20Y7

Account Titles                      Debit        Credit

Cash                                $119,630

Accounts Receivable         26,100

Prepaid Insurance               8,400

Prepaid Rent                       6,000

Supplies                              11,200

Land                                375,000

Equipment                     325,900

Accumulated Depreciation - Equipment $32,600

Accounts Payable                                        10,830

Salaries Payable                                            7,500  

Unearned Fees                                           21,000

Common Stock                                         180,000  

Retained Earnings                                   620,300

Total                            $872,230           $872,230

4 0
3 years ago
In the LMN partnership, Lynn's capital is $60,000, Marty's is $80,000, and Nancy's is $70,000. They share income in a 4:3:3 rati
Minchanka [31]

Answer:

D. $52,000

Explanation:

As for the provided information,

We have,

Total capital of Nancy = $70,000

Payment to Nancy on retirement = $84,000

Since no goodwill is recorded any extra payment to Nancy will be debited against existing partner's capital account.

Amount debited against Lynn's Capital Account = ($84,000 - $70,000) \times 4/(4+3) = $8,000

Balance of capital after such payment of Lynn's capital account = $60,000 - $8,000 = $52,000.

4 0
3 years ago
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