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soldier1979 [14.2K]
2 years ago
12

The management of Osborn Corporation is investigating an investment in equipment that would have a useful life of 4 years. The c

ompany uses a discount rate of 12% in its capital budgeting. The net present value of the investment, excluding the annual cash inflow, is −$405,014. How large would the annual cash inflow have to be to make the investment in the equipment financially attractive? (Ignore income taxes.)
Business
1 answer:
katovenus [111]2 years ago
3 0

Answer:

The equipment shall be financially attractive when we have annual cash inflow in excess of 132,686

Explanation:

Calculate the PVIFA ( Present value of interest factor annuity ) at r = 12 % and n = 4 years

= [ 1 - (1.12)-4 ] / 0.12 = 3.03734935

Minimum annual cash flow needed = Investment / PVIFA = 403,014 / 3.03734935

= 132686

The equipment shall be financially attractive when we have annual cash inflow in excess of 132,686

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Given the future value, which of the following will contribute to a lower present value? A. Higher discount rate B. Fewer time p
Natali5045456 [20]

Answer:

D

Explanation:

7 0
3 years ago
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A company deposits $3500 in a bank at the end of every year for 12 years. The company makes no deposits during the subsequent 8
Firdavs [7]

Answer:

FV= $94,108.42

Explanation:

<u>First, we need to calculate the future value of the 12 annual deposits:</u>

FV= {A*[(1+i)^n-1]}/i

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FV= {3,500*[(1.06^12) - 1]} / 0.06

FV= $59,044.79

<u>Now, the future value at the end of the 20 years (8 years more):</u>

FV= PV*(1 + i)^n

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4 0
2 years ago
A cartel differs from a monopoly in that ________.
Marrrta [24]
I believe the answer is: B. <span>businesses making the same product agree to limit production.

In a monopoly, only one single business exist that control the production of a certain goods in the market.
For cartel, there are a lot of established businesses with different ownership, but they agreed to control their production in order to maintain the price level in the market.
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3 0
2 years ago
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Kinkead Inc. forecasts that its free cash flow in the coming year, i.e., at t = 1, will be -$10 million, but its FCF at t = 2 wi
Gwar [14]

Answer:

correct option is b. $167

Explanation:

given data

free cash flow FCF 1 = -$10 million

t = 1

free cash flow FCF 2= $20 million

t = 2

FCF grow rate = 4%

average cost of capital = 14%

to find out

what is the firm's value of operations

solution

first we get here firm value in year 2 that is express as

firm value in year 2 = expected FCF in 3 ÷ (cost of capital - growth)    .........1

put here value

firm value in year 2 = \frac{20*(1+0.04)}{0.14 - 0.04}

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and

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firm value = \frac{208}{(1+0.14)^2} +\frac{20}{(1+0.14)^2} +\frac{-10}{(1+0.14)}

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so correct option is b. $167

3 0
3 years ago
A Lorenz curve showing perfect equality in the distribution of income:
valentinak56 [21]

Answer:

Option (C) is correct.

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5 0
2 years ago
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