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NeTakaya
3 years ago
10

Assume that instead, the debtholders had negotiated a covenant based on the maximum amount of investment (so, they set a maximum

on the amount of investment, such as the $500in project costs). Assume that the probabilities and returns are proportionate (so, 40%probability that you double your money, and 60% chance that you lose your investment). What is the maximum amount of investment into this type of project that would allow shareholder and debtholder incentives to be aligned (should be less than $500 in this instance)?
Business
1 answer:
Ulleksa [173]3 years ago
3 0

Answer:

if we assume that the maximum investment must reach $ 500 Then the maximum that the shareholder should invest with $ 500  to not exceed the investment covenant, considering that these $ 500 have a 40% chance to earn $200. debtors should always consider the maximum amounts required in financial covenants.

E

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4 years ago
Joe has $100,000 in an investment account. He is looking to retire in 12 years. He needs a minimum of $240,000 in order to retir
Paul [167]

Answer:

Present value (PV) = $100,000

Number of years (n) = 12 years

Future value (FV) = $240,000

FV = PV(1 + r)n

$240,000 = $100,000(1 + r)12  

<u>$240,000</u> = (1 + r)12

$100,000

2.4 = (1 + r)12

12√2.4 = 1 + r

1.0757 - 1 = r

0.0757 = r

r = 0.0757 = 7.57% = 8%

Explanation:

In this case, we need to apply the formula for future value of a lump sum (single investment). The present value, future value and number of years have been provided in the question with the exception of interest rate. Thus, interest rate becomes the subject of the formula,which implies that we will solve for interest rate.

7 0
4 years ago
What is the proper adjusting entry at December 31. the end of the accounting period, if the balance in the prepaid insurance acc
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Answer:

C. Debit Insurance Expense, dollar 4, 500; Credit Prepaid Insurance, dollar 4, 500

Explanation:

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              ($7,750-3,250)

Option C is correct.

7 0
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How to calculate a trial balance​
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Answer:

Here is the answer

hope it helps u

Please mark As Brainliest

<h2>( ^_^ ) </h2><h2 /><h2 /><h2>BTS ARMY GIRL ( 방탄소년단 )</h2>

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