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kolezko [41]
3 years ago
8

A lottery winner can take $6 million now or be paid $600,000 at the end of each of the next 16 years. The winner calculates the

internal rate of return (IRR) of taking the money at the end of each year and, estimating that the discount rate across this period will be 4%, decides to take the money at the end of each year. Was her decision correct
Business
2 answers:
Semmy [17]3 years ago
5 0

Answer:

Yes, her decision was correct because of Net present value rule.

Explanation:

the net present value (NPV) applies to a series of cash flows occurring at different times.

The present value of a cash flow depends on the interval of time between now and the cash flow. It also depends on the discount rate. NPV accounts for the time value of money. It provides a method for evaluating and comparing capital projects or financial products with cash flows spread over time, as in loans, investments, payouts from insurance contracts plus many other applications.

Time value of money dictates that time affects the value of cash flows.

harkovskaia [24]3 years ago
5 0

Answer:

She was correct, the IRR for the cash flow is 6.15% compared to the 4% discount rate.

Explanation:

The two basic ways to decide whether a project is feasible or not are the net present value (NPV) and the internal rate of return (IRR).

The net present value is the prime test that you must always use first. But in this case, you do not need to calculate it because the IRR is higher than the discount rate. The IRR is the discount rate at which the NPV will equal 0. So an IRR higher than the discount rate will always yield a positive NPV.

Projects are considered feasible when the NPV ≥ 0, and if you have to choose between two or more mutually exclusive projects and both have positive NPVs, you should choose the project with the highest IRR (or MIRR if you really like math).

Since I like math, the NPV = $991,377, and you need more information to calculate MIRR.

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The SEC's ____ reviews the registration statement filed when a firm goes public, corporate filings for annual and quarterly repo
Crazy boy [7]

Answer:

The correct answer is letter "A": Division of Corporate Finance.

Explanation:

The Division of Corporate Finance is a body of the U.S. Securities and Exchange Commission (SEC) in charge of monitoring if publicly traded companies disclose enough information for investors to make informed decisions. The Division of Corporate Finance is also responsible for reviewing new institutions filings to go public by checking their Financial Statements, Form 10-Ks -company's performance, Form 10-Qs -quarterly financial reports, and proxy materials for voting among others.

The division does not disclose the criteria of evaluation to ensure integrity in the process.

6 0
3 years ago
When school districts are funded by local taxes only, the likelihood of disparities in funding goes up.
S_A_V [24]
I think the answer is false because many schools raise fundraisers to help pay for things. If this is the case the money for the school will be quite low
5 0
3 years ago
If a cash basis business owner pays 18 months of rent expense in advance during the last month of the tax year, how is this trea
borishaifa [10]

Answer:

Check the following consideration

Explanation:

Since the business owner follows cash basis of accounting the treatment is amount expensed during the financial year can be shown as expenses. hence in the current case rent for 18months can be shown as expenses for that financial year and it can be shown as a deduction while computing tax liability.

7 0
3 years ago
Jensen Co. expects to pay €50,000 in one month for its imports from France. It also expects to receive €200,000 for its exports
Julli [10]

Answer:

-$5,873

Explanation:

For computation of maximum one month loss in dollars first we need to find out the net exposure and maximum one month loss in percentage which is shown below:-

Net exposure = Received amount - Paid amount

= €200,000 - €50,000

= €150,000

Maximum one - month loss in Percentage = Next month percentage - (Alpha × Euro percentage)

= 2% - (1.96 × 2.5%)

= -2.9%

Maximum one - month loss in Dollars = Net exposure × Current spot rate of the euro × Maximum one - month loss in Percentage

= €150,000 × $1.35 × (-0.029)

= -$5,873

5 0
3 years ago
A firm reports a net margin of 5.00%. The firm has 1,456,800.00 million shares outstanding. The firm has invested in a new produ
n200080 [17]

Answer:

To find Earning per share, we can find this by the following formula:

Increase in Earnings Per Share = Net profit of new products / Number of shares

and

Net Profit of new products = 5% * $4,898,300 = $244,915

Increase in Earnings Per Share = ($244,915) / 1,456,800 = 16.81%

8 0
3 years ago
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