Answer:
1. IRR for the first investment: 13%
2. IRR for the second investment: 10%
3. IRR for the first investment give changes in cash flow: 4%
Explanation:
IRR is the discount rate that will bring project's net present value to 0. Apply this, we will calculate IRR in each given scenario:
1. -900,000 + (300,000/IRR)/ [ 1 - (1+IRR)^-4] = 0 <=> IRR = 13%
2. -755,000 + 400,000/(1+IRR) + 500,000/(1+IRR)^2 = 0 <=> IRR = 10%
3. -900,000 + (250,000/IRR)/ [ 1 - (1+IRR)^-4] = 0 <=> IRR = 4%
(all the answers have been rounded to whole percentage values as required in the question).
Answer:
d. A loan received will reduce capital
Explanation:
Capital is the collection of financial assets required to start and maintain a business. Capital is the money required to begin the operations of a business. The money is used to purchase assets and materials used in the production of goods or services. Capital is either borrowed( debt ) or from the owner's savings ( equity).
A loan is cash borrowed to boost the financial strength of an individual or a business. Should a business opt for a loan, it means it will have more cash to finance its operations. Its ability to produce goods and services is increased. Therefore, a loan is an addition to capital.
<span>Assuming no other transaction happened during the year, the long term investments in the balance sheet will increase. The answer is letter A.This is because Joan already purchased 10,000 shares of Smith Metals Inc. for $34,000 in exchange for cash and at the same time, she holds 3.2% of the voting stock of Smith Metals Inc. Also, Joan's company, Steel Inc. wanted o hold the stocks for two years.</span>
