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egoroff_w [7]
3 years ago
14

A firm is considering a simple investment project. If it goes forward, then the firm must pay $6 million now and $4 million in o

ne year. Two years from now the project is expected to pay back $5 million, and three years from now it is expected to pay back another $10 million. Suppose that the firm’s opportunity cost of capital is 25%. (a) What is the present value of the project? (b) Under what conditions should the firm do the project?
Business
1 answer:
Diano4ka-milaya [45]3 years ago
8 0

Answer:

Explanation:

Giving the following information:

The firm must pay $6 million now and $4 million in one year. Two years from now the project is expected to pay back $5 million, and three years from now it is expected to pay back another $10 million.

Io= -6,000,000

1= 4,000,000

2= 5,000,000

3= 10,000,000

i=0.25

We need to use the following formula:

NPV= -Io + ∑[Cf/(1+i)^n]

Cf= cash flow

NPV= 5,520,000

The firm should do the project when the net present value is positive.

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Answer:

$10,000 divided by the future amount of an ordinary  annuity of 40 payments of $1 each at an interest rate of  3% per period.

Explanation:

given data

semiannual payments = $10,000

time period = 20 year

annual rate = 6%

solution

The question has future value because it calculates the periodic amount of the annual amount that must be invested to produce the given amount in the future.

Accordingly, the appropriate factor showing the effect of compound interest is derived from the formula for the future value of the common annuity of $1

This factor multiplied by the periodic payment is equal to the future amount. If the payment is unknown, the future amount of the regular annuity formula can be calculated by dividing the future amount ($ 10,000) by the appropriate factor obtained.

when payment is made semiannually for 20 years,

then 40 compounding period is involved.

If the interest rate is 6% the semiannual interest rate is 3%.

3 0
3 years ago
The financial budgets include the Select one: a. cash budget and the selling and administrative expense budget. b. cash budget a
Mekhanik [1.2K]

Answer:

The correct answer is B. Cash Budget  and Budgeted Balance Sheet

Explanation:

The financial budget refers to the economic and financial resources necessary to develop or carry out the activities or processes and / or to obtain the essential means to be calculated, such as the cost of completion, the cost of time and the cost of acquiring New resources Commonly the feasibility is the most important part, since with it other inadequacies of other resources are solved. The above is the hardest thing to achieve and additional actions are needed when they are not available.

It includes the analysis of the investment, the projection of income and expenses and the form of financing. In this work, people who wish to start a business should keep in mind that this will be their greatest source of information.

7 0
4 years ago
Based on the information just given, what will be Robert’s forecast of PAMC’s growth rate? 7.75% 0.02% 4.50% 3.00%
sergiy2304 [10]

Answer:

the growth rate is 3%

Explanation:

The computation of the PAMC growth rate is shown below:

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0.078 - growth rate = 0.048

So, the growth rate is 3%

We simply applied the above formula so that the correct value could come

And, the same is to be considered  

7 0
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Dominik [7]
I don’t remember that question
5 0
3 years ago
When GM advertises its cars, the company is trying to cause a?
Likurg_2 [28]

Answer:

The correct answer is option b.

Explanation:

When GM advertises its cars, it's trying to increase the demand for its cars.

An increase in the demand for a product is indicated by a rightward shift in its demand curve.

So advertising indicates that the company is trying to shift it's demand curve to the right.

A rightward shift in demand is caused by change in other factors while price of the product remains constant.

7 0
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