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andreyandreev [35.5K]
3 years ago
5

A firm needs a data center with a life of three years. After three years, the data center is not needed and has no salvage value

. The firm is deciding on the least costly alternative to access the data center. Under Plan A, the firm can incur an upfront cost of $120, 000. For this amount, the firm can purchase the center and move in immediately and use the facility. Under Plan B, the firm may lease the data center from owners on a monthly basis. The monthly rent is $3, 500. The firm’s borrowing cost based on APR (annual percentage rate) is 5% with semiannual compounding. Which option would you recommend to the firm? Purchase or rent? Show work. (20 pts.)
Business
1 answer:
Tema [17]3 years ago
5 0

Answer:

Recommendation : The firm should lease the data center

Explanation:

<em>To determine which option is better, we would compare the upfront cost of option A to the present value of the lease payment.</em>

<em>The present value of the lease payment is given as follows:</em>

PV = A×  1-1+r^(-n) /r

A- semi-annual  lease payment - 3,500× 6 =  21,000

r- semi-annual interest rate = 5%/2 = 2.5%

n- number of period = 3× 2 = 6.(note that interest is compounded semi- annually i.e every six month)

PV of the lease payment =  21,000 × (1 - 1.025^(-6))/0.025 =115,670.63.

Comparing the two options, we have :

Purchase cost = 120,000

Lease cost = 115,670.63.

The lease cost is lower and would save the firm 4329.37 i.e (120,000 - 115,670.63)

Recommendation : The firm should lease the data center

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d. risk resulting from an expected automobile industry shock g

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Keys industries has assets of $2,100, sales of $2,960, operating costs of $2,675, and $250 of total current liabilities consisti
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<u>Calculation of Return on Total Assets:</u>

Return on Total assets can be calculated using the following formula:

Return on Total Assets = Net Income / Total Assets

We can calculate Net income as follows:

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3 years ago
3) mario's home systems has sales of $2840, costs of goods sold of $2180, inventory of $508, and accounts receivable of $432. ho
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84.84 days take Mario's to sell its inventory.

<h3>What is meant by Inventory?</h3>

All the goods, merchandise, and supplies that a company keeps on hand in anticipation of selling them for a profit are referred to as inventory.

The products and materials that a company keeps on hand with the intention of reselling, producing, or using them are referred to as inventory or stock. The main focus of inventory management is determining the location and shape of stocked commodities.

Data given in the question:

Sales = $2,880

costs of goods sold = $2,220

Inventory = $51

Accounts receivable = $436

Now,

Time taken to sell inventory = 365 ÷ ( Inventory Turnover Ratio )

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Inventory Turnover Ratio = [ Cost of goods sold ] ÷ [ Average inventory ]

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Therefore,

Time taken to sell inventory = 365 ÷ 4.3023

= 84.84 days

To learn more about Inventory refer to:

brainly.com/question/24868116

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