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LenKa [72]
4 years ago
14

Your buddy in mechanical engineering has invented a money machine. The main drawback of the machine is that it is slow. It takes

one year to manufacture $100. ​However, once​ built, the machine will last forever and will require no maintenance. The machine can be built​ immediately, but it will cost $1,000 to build. Your buddy wants to know if he should invest the money to construct it. If the interest rate is 9.5% per​ year. a. What should your buddy​ do? b. What is your advice if the machine takes one year to​ build?
Business
1 answer:
m_a_m_a [10]4 years ago
5 0

Answer:

 

Explanation:

a ) We shall calculate the NPV of the project . If it is positive , then money can be invested

Cash outflow in the beginning =1000

Present value of perpetual annuity of 100 at 9.5 %

100 / .095

= 1052.63

which is more than initial cash outflow

So NPV is positive

Hence money can be invested.

b )

If machine takes one year to build , first year cash outflow of 100 will be absent

Present value of 100 after 1 year

= 100 / 1.095

= 91.32

So present value of annuity

= 1052.63 - 91.32

= 961.31

This is less than 1000 so

NPV is negative.

Hence money can not be invested.

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5. Explain what would happen to interest rates if a new process was developed that allowed automobiles to run off oil that was f
harkovskaia [24]

Answer:

When the new processes are developed for manufacturing it results in interest rate fluctuations. However, operational costs would become uncertain which would further affect the total production costs. Thus the value of an investment would be impacted. Automobile demand from the customers will also get affected. thus, fall in interest rate will have a significant and positive affect on the sale of automobiles as well as revenue.

3 0
3 years ago
Your savings account is currently worth $1,200. The account pays 5 percent interest compounded annually. How much will your acco
Flura [38]

Answer:

$2,010  

Explanation:

The future value of the savings account in 6 years can be computed using the below future value formula:

FV=PV*(1+r)^n

FV=unknown future amount

PV=current worth of the savings account=$1,200

r=annual interest rate=5%

n=number of years envisaged=6

FV=$1,500*(1+5%)^6

FV=$1,500*(1.05)^6

FV=$1,500*1.3400956  

FV=$2,010  

7 0
3 years ago
Suppose that a firm has a price-earnings ratio which is higher than a value deemed to be normal. Investors tend to infer from th
Dmitrij [34]

Answer:

(C) The Firm's stock is overvalued and one should consider selling the stock

Explanation:

Price Earnings Ratio is a measure of market price of stock in relation to it's earnings. It shows how well a company's stock is valued in the market.

Price Earnings Ratio = \frac{Market\ Price\ Per\ Share}{Earnings\ Per\ Share}

A high price earnings ratio would lead investors to believe that the firm's stock prices are higher than it's earnings which means the stock prices are overvalued.

This further means, the market price of those stocks is greater than their fair value and it would be beneficial to investors to sell such stocks as it would result into a gain.

Thus, a higher price earnings ratio will lead investors to infer that the firm's stock is overvalued and one should consider selling the stock.

8 0
3 years ago
A company incurred the following costs for a new delivery​ truck: Purchase price $ 150 comma 000 Sales tax 7 comma 900 Delivery
MrMuchimi

Answer:

$168,200

Explanation:

Given that,

Purchase price = $ 150,000

Sales tax = 7,900

Delivery charge from​ sellers location = 1,200

Special racks for storage = ​3,000

Normal repairs to the truck before it was used for the first time = ​1,100

Signs painted on the truck ​= 2,000

Insurance on truck before it was used for the first time = ​3,000

All the above expenses are included in determining the cost of the delivery truck. Normal repairs to the truck and insurance on truck are also included in the cost of truck because it was incurred before the truck used for the first time.

Cost of the delivery​ truck:

= Purchase price + Sales tax + Delivery charge from​ sellers location + Special racks for storage + Normal repairs to the truck before it was used for the first time + Signs painted on the truck + Insurance on truck before it was used for the first time

= $150,000 + $7,900 + $1,200 + $3,000 + $1,100 + $2,000 + $3,000

= $168,200

5 0
3 years ago
I need help ASAP!!!!
aleksandr82 [10.1K]

Answer:Feet

Explanation:

with what?

3 0
3 years ago
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