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asambeis [7]
3 years ago
14

A major electronics manufacturer expects to generate additional revenue from its recently won government contract. The company f

orecasts that the revenue will be $190 million in the first year, but will decline by $2 million every year for the next 3 years. What is the present worth of total revenue at an interest rate of 18% per year?
Business
1 answer:
xxTIMURxx [149]3 years ago
7 0

Answer:

504.15 million.

Please find the detailed answer as follows:

Explanation:

Consider the following calculations. The key to solve the exercise is to apply the formula of compound interest.

Present Value = 190/(1+.18)^1 + (190 -2)/(1+.18)^2 + (190 - 2 - 2)/(1+.18)^3 + + (190 - 2 - 2 - 2)/(1+.18)^4 = 504.15 million

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As Quentin checks out of a hotel, he recalls the expectations of quality and service he had upon arriving at the hotel and reali
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A

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3 years ago
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3 years ago
Elinor is asked to invest $5100 in a friend's business with the promise that the friend will repay $5610 in one year. Eleanor fi
DaniilM [7]

Answer:

the opportunity cost of capital in this case is 8%

Explanation:

From the information given :

Elinor is asked to invest $5100 in a friend's business with the promise that the friend will repay $5610 in one year.

Eleanor finds her best alternative to this investment, with similar risk, is one that will pay her $5508 in one year.

U.S. securities of similar term offer a rate of return of 7%.

The opportunity cost of capital can be determined by using the expression:

A = P ( \dfrac{1+r}{100})^n

where;

A = amount = $5508

P = Principal = $5100

r = opportunity cost of capital  = ???

n = number of years = 1 year

5508= 5100 ( {1+ \dfrac{r}{100})^1

\dfrac{5508}{5100}=  ( {1+ \dfrac{r}{100})^1

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3 years ago
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