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Helen [10]
3 years ago
12

You would like to have the current equivalent in terms of today's buying power of $2,500 in 10 years. How much would you have to

invest today (in nominal terms) to fund this level of real consumption?
You expect inflation to be 5% per year over that time period. Your investments earn 7% per year in nominal terms.

A. $2,112
B. $2,500
C. $1,271
D. $2,070
Business
1 answer:
KengaRu [80]3 years ago
5 0

Answer:

D. $2,070

Explanation:

First, convert $2500 real dollar amount at year 10 to  to nominal amount;

If inflation rate is 5% per year, then in 10 years the inflation will compound to the following;

1.05^ 10 = 1.6289

Therefore, the nominal amount of your savings would be

= $2500*1.6289

= $4,072.25

Next, that would be your future value( FV), find its present value using the 7% as the discount rate. On a financial calculator, input the following;

FV = 4,072.25

I/Y = 7%

N= 10

PMT = 0

then compute present value ; CPT PV = $2,070

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You are offered a chance to buy an asset for $4,500 that is expected to produce cash flows of $750 at the end of Year 1, $1,000
zzz [600]

Answer:

<em>a. 22.64%</em>

Explanation:

At first we are going to need to compute the Internal rate of return(IRR) (in which the current value of inflows = the current value of outflows)

Let's let the IRR be <em>x percent</em>

Therefore $4,500 = $750 / (1.0x)

+ $1,000 / (1.0x) <em>power 2</em> + $850 / (1.0x) <em>power 3 </em>

+ $6,250 / (1.0x) <em>power 4</em>

Thus, x = approximate return rate = <em>22.64 percent</em>

6 0
3 years ago
Gross private domestic investment includes business: a. purchases of capital goods, all new construction, and inventory investme
olganol [36]

Answer:

a. purchases of capital goods, all new residental constructionand inventory investment

Explanation:

It is the investment measure used for determining the GDP. It is an important part of GDP as it is used as an indicator for the productive capacity i.e. future. It involves the purchase i.e. replacement, net addition made to the capital assets, and the investment made in inventories

So according to this, the option a is considered as it involved all three thins that are shown above

5 0
3 years ago
__________ is an arrangement whereby someone with a good idea for a business sells the rights to use the business name and sell
ira [324]

Answer:

Franchise

Explanation:

This is a business arrangement where the owner of a successful business gives the right (through special business and legal arrangement) to another, to run such business in a specified location using his brand name in accordance with agreed terms and conditions. Under this arrangement, technical support and training are always provided by the franchiser.

The franchisor charges the franchisee a fee for the right which in most cases is periodic. The franchise is renewable.

7 0
3 years ago
Fischer Company has outstanding 8,000 shares of $100 par value, 5% preferred stock, and 50,000 shares of $1 par value common sto
nikklg [1K]

Answer:

The appropriate solution is "$130,000".

Explanation:

The given values are:

No. of common shares outstanding

= 50,000

Dividend per share

= $1.80

No. of preferred shares outstanding

= 8,000

Dividend per share

= $5

Now,

The total dividend on common shares will be:

=  No. \ of \ common \ shared \ outstanding\times Dividend \ per \ share

On substituting the values, we get

=  50,000\times  1.80

=  90,000 ($)

The total dividend on preferred stock will be:

=  No. \  of \ preferred \ shares \ outstanding\times Divided \ per \ share

On substituting the values, we get

=  8,000\times 5

=  40,000 ($)

Hence,

The total dividend paid by company will be:

=  Total \ dividend \ on \ common \ shares +Total \ dividend  \ on \  preferred \ stock

=  90,000+40,000

=  130,000 ($)

Thus the above is the correct answer.

4 0
2 years ago
When a company sells property and then leases it back, any gain on the sale should usually bea. deferred and recognized as incom
Julli [10]

Answer: A. deferred and recognized as income over the term of the lease.

Explanation:

In a sale-leaseback transaction, that is when a property is sold by a company and leased back, the property seller is the lessee and the property purchase is the lessor. In this case, a sale-leaseback will allow a company to sell an asset so that the company can raise capital, after which the asset can then be leader back.

When a company sells property and then leases it back, any gain on the sale should usually be deferred and recognized as income over the term of the lease.

6 0
3 years ago
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