Net income = $125,000
Interest expense = $30,000
Tax expense = $40,000
Interest times hart corporation earned
for the year = ?
First add all the expenses and then
divided by interest expense to get interest times.
= ($125,000 + $30,000 + $40,000) /
$30,000
= $195,000 / $30,000
<span>= 6.5 </span>
Answer:
First project
Explanation:
The 2 options/ project been considered:
1. Buying 10% of shares in a publicly traded american company that owns five power generation units in Pakistan
2. To be partner with equal share with one private company in building a new power generation unit in Pakistan
The first option/project would have a higher required return because:
<em>- This company is already settled in the country having five power generation units in Pakistan. All these units are running and making profit.</em>
<em>- Investment Option 2 is high riskier as we do not know the details of the new company and there are so many unforeseen circumstances surrounding establishing such project in the company. It will also take time to establish in order to start make it profitable.</em>
Answer:
R is a better alternative because it has a higher NPV than Q.
Explanation:
Machines Q R
First costs $380,000 $395,000
Net annual revenue $150,000 in year 1, $152,500
increasing by $500
per year thereafter
Salvage value $4,000 0
Life, years 8 10
MACRS 7 year recovery:
year % Q R
1 14.29% 54,302 56,445.50
2 24.49% 93,062 96,735.50
3 17.49% 66,462 69,085.50
4 12.49% 47,462 49,335.50
5 8.93% 33,934 35,273.50
6 8.92% 33,896 35,234.00
7 8.93% 33,934 35,273.50
8 4.46% 16,948 17,617.00
net cash flow
year Q R
1 116,505.70 118,880.93
2 130,396.70 132,982.43
3 121,411.70 123,304.93
4 115,086.70 116,392.43
5 110,676.90 111,470.73
6 110,930.10 111,456.90
7 111,326.90 111,470.73
8 108,306.80 105,290.95
9 99,125
10 99,125
Using a financial calculator, I calculated the NPV using a 12% discount rate:
- Q's NPV = $200,636.15
- R's NPV = $259,221.01
Answer:
$800
$1,000
The quantity of money demanded decreases as the interest rate rises.
Explanation:
a
To calculate the opportunity cost on government bond at 8%, we use the following method
Opportunity Cost for 8% interest rate on Government Bonds
= (8/100)%× $10,000
= 0.08% ×$10,000
= $800
To calculate the opportunity cost government at bond on 10%, we use the following method
Opportunity Cost for 10% interest rate on Government Bonds
= (10/100)%× $10,000
= 0.1%×$10,000
= $1,000
b. The quantity of money demanded decreases as the interest rate rises.
Answer:
As the price level rises, the purchasing power of households' real wealth will <u>fall</u>, causing the quantity of output demand to <u>fall.</u> This phenomenon is known as the <u>wealth</u> effect.
Additionally, as the price level rises, the impact on the domestic interest rate will cause the real value of the dollar to <u>rise</u> in foreign exchange markets. The number of domestic products purchased by foreign (exports) will therefore <u>fall</u>, and the number of foreign products purchases by domestic consumers and firms(imports) will <u>rise</u>.
Net exports will therefore <u>fall</u>, causing the quantity of domestic output demanded to <u>fall.</u> This phenomenon is known as the <u>exchange rate</u> effect.
