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Fiesta28 [93]
3 years ago
14

You have a choice among three options. Option 1: receive $900 immediately. Option 2: receive $1,200 one year from now. Option 3:

receive $2,000 five years from now. The interest rate is 15 percent. Rank these three options from highest present value to lowest present value.
Business
1 answer:
vovangra [49]3 years ago
8 0

Answer:

Option 2

Option 3

Option 1

Explanation:

Present value is the sum of discounted cash flows.

Present value can be calculated using a financial calculator

Present value of option 1 = $900

For option 2 :

Cash flow in year 1 = $1200

I = 15%

Present value = $1,043.48

For option 3 :

Cash flow each year from year 1 to 4 = 0

Cash flow in year 5 = $2000

I = 15%

Present value =$ 994.35

From the above figures, option 2 has the highest present value, followed by option 3 and then option 1.

To find the PV using a financial calacutor:

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

I hope my answer helps you

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koban [17]

Answer:

$230,825

Explanation:

VU = [$56,700 × (1 - .35)] / .162

VU= $56,700×0.65/.162

VU=36,855/.162

VU = $227,500

VL = $227,500 + .35($9,500)

VL= $227,500+$3,325

VL= $230,825

7 0
3 years ago
Pharrell, Inc., has sales of $602,000, costs of $256,000, depreciation expense of $62,500, interest expense of $29,500, and a ta
hjlf

Answer:

The earnings per share figure is $1.89

Explanation:

Sales of $602,000

Costs of $256,000

Depreciation expense of $62,500

Interest expense of $29,500

Tax rate of 40 percent.

-> Profit Before Tax  = Sales - Cost - Depreciation Expense - Interest expense

= $602,000 - $256,000 - $62,500 - $29,500

= $254,000

Net profit = Profit before Tax x (1 - Tax rate) = $254,000 * (1 - 40%) = $152,400

Earnings per share = (net profit - dividend paid for preferred stock)/ common stock outstanding = ($152,400-$44,500)/ 57,000

= $1.89

7 0
3 years ago
Part of the decision to accept additional business should be based on a comparison of the incremental (differential) costs of th
postnew [5]

Answer:

TRUE

Explanation:

Marginal Benefit is addition to total benefit due to a business decision.

Marginal Cost is addition to total cost due to a business decision.

Marginal Benefit & Marginal Costs are determinants while considering a business decision. A decision will be taken if : Marginal Benefit ≥ Marginal Cost, as entrepreneurial decision maker would be better off or at least neutral while taking decision. If MB < MC , it is loss making for the entrepreneur to take that decision & hence is discouraged to take that.

6 0
3 years ago
Mr. Smith, a cash-basis, calendar-year taxpayer, owns a duplex. He lives in one unit and rents the other unit to an unrelated in
Angelina_Jolie [31]

Answer:

Mr. Smith’s rental expense for this insurance policy is

A. $30

Explanation:

Premiun 360

N 3

year 120

From July to December 60

 

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5 0
3 years ago
You work for a leveraged buyout firm and are evaluating a potential buyout of UnderWater Company.​ UnderWater's stock price is $
sladkih [1.3K]

Answer:

a. The shareholders will want to tender their shares.

c.  The gain will be $25.31 million – $23.44 million = $1.87 million.

Explanation:

a. The value of the firm is 1.25 million shares* 15= $18.75 million.

Increase in value, 18.75*135% = $25.31 million, so now this is the value of the firm

If 50% of the shares are bought for $18.75 Million, you will buy 0.625 million shares, so the total amount that will be paid is $11.72 million.

Now, the money against shares will be borrowed as collateral. This means that the new value of the equity will be $25.31 million – $11.72 million = 13.59 million.

1.25 million shares are there so now the price of the share will be  =  $10.87 million ($13.59 million/$1.25 million = $ 10.87 million).

b.The price of the shares has decreased from $13.59 to $10.87 after the tender offer, everyone will want to tender their shares for $18.75.

c. Supposing everyone tenders the shares and you will buy at $18.75 per share, you will pay $23.44 (18.75 per share *1.25 million shares) to acquire the company and it will be worth $25.31 million.

The gain will be $25.31 million – $23.44 million = $1.87 million.

3 0
3 years ago
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