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enyata [817]
3 years ago
8

You are considering in investing one of the two options: Investment A requires a $255,000 upfront payment from you and generates

$21,000 revenue annually. Investment B requires an $175,000 upfront payment from you with annual gains of $29,000. After how many years would the total return from Investment A and B be equal?
a. 6
b. 8
c. 10
d. 12
e. Never
Business
1 answer:
Ainat [17]3 years ago
3 0

Answer:

Option (E) Never

Explanation:

NPV from Investment Project 1 = ($255,000) + $21,000 / (r)

NPV from Investment Project 2 = ($175,000) + $29,000 / (r)

The question says that find the number of years that equals the total return which means the NPV from both investments is equal:

($255,000) + $21,000 / (r) = ($175,000) + $29,000 / (r)

$21,000 / (r) - $29,000 / (r) = $255,000 - $175,000

-$8000 / r = $80,000

r = - 8000 / 80000 = -0.01 = - 10%

The negative sign shows that project A can not make a positive NPV that will be equal to that of project B and vice versa. It can also be illustrated by putting the value of r in "NPV from Investment Project 1"

NPV from Investment Project 1 = ($255,000) + 21000 / -0.01

= ($255,000) - $210,000 = ($465,000)

This shows that the company will have to make losses of $465,000 which is not possible because company will not select projects with negative NPVs.

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Answer:

a.                                               Debit         Credit

Cash                                       $174,600

Discount on bond payable   $18,941

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<u>Workings</u>

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Market value of Warrants    <u>20,760</u>

Total market value               176,460

Value assigned to Bonds = 174,600 / 176,460 * 155,700 = 154,059

Value assigned to Warrants = 174,600 / 176,460 *20,760 = 20,541

b.                                              Debit       Credit

Cash                                        $174,600

Discount receivable                                 $1,600

         Bonds Payable                                $173,000

5 0
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Answer:

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Explanation:

To begin with, the liquidity is the feature of those assets to converting the most quickly as possible in cash and therefore the the most liquid asset is properly the dollar bill and the less liquid asset is the house due to the fact that it could take years to sell by a proper offer and becoming actual cash. In conclusion, it works that way with all the other assets, the liquidity of each one is higher or lower depending on the quickness of converting into cash.

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