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Natali [406]
3 years ago
5

Spinning Wheels Co. is considering renting a new bike shop. The landlord has offered a number of alternatives for paying the ren

t. The company's desired rate of return is 10%.The landlord offered a 3-year lease with the rent payments as follows: $8,000 at the end of the first year, $12,000 at the end of the second year, and $14,000 at the end of the third year. Using a spreadsheet or financial calculator, calculate the present value of the rent payments over the life of the lease.
Business
1 answer:
Vera_Pavlovna [14]3 years ago
4 0

Answer:

The present value of the rent payments over the life of the lease is  $27,708

Explanation:

Year 1: $8,000

Year 2: $12,000

Year 3: $14,000

Rate of return: 10%

Option 1:

The present value of the rent payments over the life of the lease can be calculated in excel in the formula of NPV

= NPV(Rate, Cash in year 1, cash in year 2, cash in year 3) = NPV(10%,8000,12000,14000) = $27,708

Option 2:

NPV of cash in Year 1 after 3 years = $8,000/(1+10%)^1 = $7,273

NPV of cash in Year 2 after 2 years = $12,000/(1+10%)^2 = $9,917

NPV of cash in Year 3 after 1 years = $14,000/(1+10%)^3 = $10,518

So total NPV of cash in 3 years = $7,273 +$9,917+$10,518

= $27,708

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Suppose that a university decides to spend $1 million to upgrade personal computers and scientific equipment for faculty rather
Vladimir [108]

Answer:

<u>Opportunity cost </u>

Explanation:

Suppose that a university decides to spend $ 1 milion to upgrade personal computers and scientific equipment for faculty rather than spend $  million to expand parking for students . This example illustrates<em><u> opportunity costs.</u></em>

<em>Opportunity cost refers to the cost shifting one opportunity to another opportunity or availing one opportunity in terms of another.</em>  

Formula of Opportunity cost is :

<u>Opportunity cost</u>    =  Total Revenue - Economic Profit

                                    Or

<u>Opportunity cost </u>  = What one sacrifice / What one gain

In Opportunity cost we chose one thing or option over the cost of another thing or option. Opportunity cost places a important role in economic theory .

As it tell us that people can choose only one thing not the both things at the sane time.

3 0
3 years ago
There may be a great deal of interaction between a service provider and a consumer in which they co-create value together. In su
KatRina [158]

The blank will be filled by services.

<h3>What do you mean by services?</h3>

Services are intangible activities or advantages that a business offers to meet customers' demands in exchange for cash or other valuables.

<h3>Which should be fill in blank?</h3>

There may be a great deal of interaction between a service provider and a consumer in which they co-create value together. In such situations, the customer perceives a high degree of Blank services between the service provider and the company he or she represents.

Learn more about services here brainly.com/question/24553900

#SPJ4

6 0
2 years ago
Suppose the cost of capital of the Gadget Company is 10 percent. If Gadget has a capital structure that is 50 percent debt and 5
myrzilka [38]

Cost of equity capital is closest to: 16 percent

Solution:

WACC is covered on page 120 Corporate Finance, under Capital Structure.

Using the standard equation for WACC = %wt Equity x cost of equity (re) + %wt Debt x cost of debt (rd).

Since there is a 20% tax rate for the firm, the cost of borrowing is reduced by that amount. So the cost of debt is 4%, not 5%.

Plug the formula: 10% = 50% x re + 50% x 4%

The formula ( i.e. 0.1+(0.1-0.05)(1)(1-0.2)) in CFAI reading is questionable.

The calculation is 0.1+(0.1-0.05*(1-0.2))*(1)=16%

7 0
3 years ago
Which of the following is correct? a. Short run fluctuations in economic activity happen only in developing countries. b. During
ivolga24 [154]

Answer:

The answer to this question is D When real GDP falls, the rate of unemployment generally rises.

Explanation:

Gross domestic product (GDP) is the total value of everything produced in a country, whether by its citizen or foreigners.

Real GDP is a measurement of economic output that accounts for the effects of inflation or deflation.  It provides a more realistic assessment of growth.  

Therefore when real GDP falls, the rate of unemployment  rises and this brings inflation  

8 0
3 years ago
Who wishes Ronald Regan was president again?
natta225 [31]

Answer:

me 100%

Explanation:

7 0
3 years ago
Read 2 more answers
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