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Oxana [17]
3 years ago
10

Vanessa Company is evaluating two projects. project 1 is a project requiring a capital expenditure of 814,400. the project has a

n estimated life of four years and no salvage value. The estimated net income and net cash flow from the project are as follows:
Year Net income Net cash flow

1 90,000 210,000
2 80,000 200,000
3 40,000 160,000
4 30,000 150,000
5 240,000 720,000

Companys minimum desired rate or returen for net present value analysis is 15 %. The present value of the $1 at compound intrest of 15% for 1,2,3,4 years is 0.870 0.756 0.658 and 0.572. Determine the average rate of return on investment using straight line method and net present value.
Business
1 answer:
Olegator [25]3 years ago
6 0

Answer:

The average rate of return on investment using:

 + Straight line method: 23.58%

 + Net present value: 17.85%

Explanation:

* The average rate of return on investment using straight line method:

We have Average rate of return = Average net profit/ Average investment

with average net profit = (90,000 + 80,000 + 40,000 + 30,000 + 240,000)/5 = $96,000

       average investment: (investment at the beginning + investment of the end) /2 = 814,400/2 = 407,200

=> Average rate of return = 96,000 / 407,200 = 23.58%

* The average rate of return on investment using net present value:

The average rate of return is the internal rate of return on the project which is the rate that brings the net present value to zero.

Denote the rate as x => (1+x)^(-t) is the discount rate of year t. Denote 1+x as a, we have:

-814,400 + 210,000/a + 200,000/a^2 + 160,000/a^3 + 150,000/a^4 + 720,000/a^5 = 0 <=> a = 1.1785

=> x = 17.85%

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A.J., a 20-something college graduate, was recently hired as a financial-analyst assistant for a large company. He recalled that
Helga [31]

Answer:

prepare an expense record, and make certain that his credit is good so he can continue to spend more than he makes

Explanation:

Since in the question it is mentioned that an individual is recently hired as a financial analyst for a big company he remebered that how he can manage his personal finance and the financial concerns so in order to maintain its approach with respect to his own finance we should suggest that first prepare the record of an expense and also certain about the good credit score so that he is able to spend more

Therefore the first option is correct

4 0
3 years ago
Pamela, a 1/3 partner, has an adjusted basis of $100,000 for her partnership interest. If Pamela sells her entire partnership in
creativ13 [48]

Answer: Capital gain = $10,000 ; Ordinary income = $25,000

Explanation:

Here is the complete question:

The PLM Partnership balance sheet includes the following assets on December 31 of the current year:

Basis FMV

Cash $230,000 $230,000

Accounts receivable 0 75000

Land 70,000 100,000

Total $300,000 $405,000

Pamela, a 1/3 partner, has an adjusted basis of $100,000 for her partnership interest. If Pamela sells her entire partnership interest to Emma for $135,000 cash, how much capital gain and ordinary income must Pamela recognize from the sale?

The following can be calculated based on the question above:

Pamela's share of the unrealized receivables will be the ordinary income which will be the unrealized receivables of $75000 which is then multiplied by 1/3 which is the interest. This will be:

Ordinary income = 1/3 × $75,00

= $25,000

The capital gain will be the difference that occurs between total gain and ordinary income.

Total gain difference

= $135,000 - $100,000

= $35,000

Ordinary Income = $25,000

Capital gain = $35,000 - $25,000

= $10,000

5 0
3 years ago
Recently, the owner of Martha's Wares encountered severe legal problems and is trying to sell her business. The company built a
Dovator [93]

Answer:

$523,644

Explanation:

The computation of the market value of this firm is shown below;

Asset at realizable value      amount ($)

Building appraised value       $1,300,000

Equipment current value        $327,000

Inventory Market value ($270000 ÷ 2)  $135,000

Accounts receivables ($155,200 × 97%) $150,544

Cash        $11,100

Total assets gross available  $1,923,644

(-) Owings                            -$1,400,000

The Market value of the firm        $523,644

4 0
3 years ago
Fundamental analysis shows that stock in Cedar Valley Furniture Corporation has a price that exceeds its present value. Group of
barxatty [35]

Answer:

The correct option is :

This stock is overvalued; you shouldn't consider adding it to your portfolio.

Explanation:

The stocks that are in cedar valley corporation has a price that exceedes its present value from this statement the first given option doesn't justify as the stocks rates are not undervalued.

Now, in the second option its again given that the stock will be overvalued which is true but it should be added to the portfolio is not correct. so, this option is not considered.

In the third option it mentions that stock is overvalued which is the correct option and also that it shouldn't be added in portfolio.

And the last one states that its undervalued which restricts the option at this point only.

So, third option is correct.

5 0
3 years ago
If supply for a product is high but demand is low, what most likely needs to happen to achieve equilibrium?
vodka [1.7K]
<span>If supply for a product is high but demand is low, the one that most likely needs to happen to achieve equilibrium is: B. The price of the product must go down. High supply of product will create an abundance in the market. By lowering the price of the product, it will attract more consumers for that product (icnreasing its demand) and will eventually lower the product abundance and bring the curve into equilibrium</span>
7 0
3 years ago
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