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viktelen [127]
3 years ago
13

A project has a capital outlay of $12.75m and will yield future cash flows of $3m per annum for the next 10 years. The required

rate of return is 12%. Ignore taxation. Evaluate the project using the Net Present Value and Internal Rate of Return approach.
Business
1 answer:
dedylja [7]3 years ago
7 0

Answer:

NPV $4.20  million(positive)

IRR 19.60% ( greater than the cost of capital of 12%)

Explanation:

The net present value of the project is the present value of future cash flows discounted at the required rate of return of 12% minus the initial investment outlay

Present value of a future cash flow=future cash flow/(1+r)^n

r=required rate of return=12%

n is the year in which the cash flow is expected, it is 1 for year 1 cash flow, 2 for year 2 and so on.

NPV=$3/(1+12%)^1+$3/(1+12%)^2+$3/(1+12%)^3+$3/(1+12%)^4+$3/(1+12%)^5+$3/(1+12%)^6+$3/(1+12%)^7+$3/(1+12%)^8+$3/(1+12%)^9+$3/(1+12%)^10-$12.75

NPV=$4.20  million

The internal rate of return is the discount at which the present value of the future cash flow and the initial outlay are the same using IRR excel function

Years cash flows

0 ($12.75)

1 $3  

2 $3  

3 $3  

4 $3  

5 $3  

6 $3  

7 $3  

8 $3  

9 $3  

10 $3  

IRR(B2:B12) 19.60%

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In a two-player, one-shot simultaneous-move game each player can choose strategy A or strategy B. If both players choose strateg
BlackZzzverrR [31]

Answer:

a) attached below

b)  Player 1 dominant strategy =  when he chooses strategy B

     Player 2 dominant strategy = when he chooses strategy B

c) Strategy A is the Nash equilibrium

d) AA  = $800

   AB , BA = $700

   BB = $400

e) Yes

Explanation:

A) The Game written in Normal form

     attached below

<u>B)</u><u> Determine each player dominant strategy</u>

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Player 2 dominant strategy = when he chooses strategy B

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D) Ranking strategy pairs from Highest to lowest

   AA  = $800

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E) The outcome can be sustained

because The Nash equilibrium is the same as the highest ranking strategy pair ( i.e. AA  = $800 )

 

   

8 0
3 years ago
Current operating income for Bay Area Cycles Co. is $44,000. Selling price per unit is $100, the contribution margin ratio is 20
torisob [31]

Answer:

• Unit variable expense $80

• Contribution margin $20

• Units currently being sold 8,800 units

Explanation:

1.a Bay area's per unit variable expense

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Therefore;

Variable cost/expense per unit = Selling price per unit - Contribution margin

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b. Contribution margin

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= 100 × 20%

= $20

2. How many units are currently being sold.

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Contribution margin per unit = Selling price per unit × Contribution margin ratio

= $176,000 ÷ $20

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Bren Company sold a car for $17,100. The cost of the car was $37,000 and the depreciation expense was recorded at 10% for five a
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The loss on the disposal of the car is $-16,200.

The first step is to determine the total depreciation on the car.

Depreciation expense = percentage depreciation x cost of the asset

$37,000 x 0.1 = $3700

The second step is to determine the book value of the car = cost of the car - depreciation

$37,000 - $3700 = $33,300.

The book value is greater than the selling price of the car, so there was a loss on the sale. The third step is to determine the gain on the sale.

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