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exis [7]
3 years ago
14

The owner of a hair salon spends $1,000,000 to renovate its premises, estimating that this will increase her cash flow by $220,0

00 per year. She constructs the above graph, which shows the net present value (NPV) as a function of the discount rate. At what dollar value should the NPV profile cross the vertical axis?A) $1,000,000B) $780,000C) Cannot be determined because inadequate information is given.D) The vertical axis crossing point cannot be calculated since the cash inflows are in perpetuity
Business
1 answer:
mina [271]3 years ago
8 0

Answer:

correct option is D) The vertical axis crossing point cannot be calculated since the cash inflows are in perpetuity

Explanation:

given data

hair salon spends = $1,000,000

increase cash flow = $220,000 per year

to find out

what dollar value should the NPV profile cross the vertical axis

solution

we know that discount rate is = 0 %

as sum of cash flow is infinite

because cash flow = $220000

cash flow is here perpetual

so we can say that correct option is D) The vertical axis crossing point cannot be calculated since the cash inflows are in perpetuity

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iogann1982 [59]
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3 years ago
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BE18.12 (LO 2, 3) Manual Company sells goods to Nolan Company during 2020. It offers Nolan the following rebates based on total
Lostsunrise [7]

Answer:

$103,400

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6 0
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Rose has a $20,000 basis in the 60% of the Parent Corporation stock that she owns. Parent Corporation owns a 70% interest in Chi
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Answer:

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Since Parent Corporation owns 70% of Child Corporation, for tax purposes they are considered as one single firm. Rose is the main stockholder of Parent Co. so for tax purposes she is also a stockholder in Child Co. When Child Co. gives her $15,000 in exchange for Parent Co. stock, this would be considered as a dividend distribution rather a stock sale.

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iren2701 [21]

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