Financial Math

You have found an asset with 12.60 percent arithmetic average return and a 10.24 percent geometric return. Your observation peri

adoni [48]

Solution:

In years Best estimate of return Working note

5 12.36% ((5-1)/(40-1)*0.1024)+((40-5)/(40-1)*0.126)

10 12.06% ((10-1)/(40-1)*0.1024)+((40-10)/(40-1)*0.126)

20 11.45% ((20-1)/(40-1)*0.1024)+((40-20)/(40-1)*0.126)

The formula for the return on assets is calculated by dividing the net income by the total average assets. The profit margin and total asset sales can also be represented as a consequence of this ratio. For the calculation of the total asset return, either formula may be used.

7 0

3 years ago

The following transactions have been journalized and posted to the proper accounts: 1. Mark Call invested $7,000 cash in his new

goblinko [34]

Answer:

$6,450

Explanation:

Calculation to determine the balance in Cash for this design service business

Using this formula

Cash balance=Cash Amount invested+Cash Received-Rent- Equipment purchased-Supplies

Let plug in the formula

Cash balance=$7,000+$3,000-$700-$2,000-$850

Cash balance=$6,450

Therefore the balance in Cash for this design service business is $6,450

8 0

3 years ago

Travis borrowed $10,000 four years ago at an annual interest rate of 7 percent. The loan term is six years. Since he borrowed th

likoan [24]

Answer:

The answer is A

Explanation:

The loan is an interest only loan since he is only paying the interest potion of 7%

Interest only loan is when the borrower pays only the interest for some or all the term of the loan with no changes in the borrowed amount

5 0

2 years ago

A new alloy can be produced by Process A, which costs $200,000 to implement. The operating cost will be $10,000 per quarter with

Andreyy89

Answer:

Difference between A and B =$42398.5

Process B is better as its PW value is smaller than Process A.

Explanation:

In order to use present worth, both Alternatives must have same time period. Since Process B has 4 years means 16 quarters so we make process A to have 16 quarters two with 2% interest rate per quarter.

Note:

We are going to use Compound Interest tables to simplify our work. Formulas can also be used.

For Process A:

Present value of process A= $-200,000-200,000(P/F,2\%,8)-10,000(P/A,2\%,16)+25,000(P/F,2\%,8)+25,000(P/F,2\%,16)$

Present value of process A= $-200,000-200,000(0.8535)-10,000(13.578)+25,000(0.8535)+25,000(0.7284)$

Present value of process A=-$466,932.5

For Process B:

Present value of process B= $-250,000-15,000(P/A,2\%,16)+40,000(P/A,2\%,16)$

Present value of process B= $-250,000-15,000(13.578)+40,000(0.7284)$

Present value of process B=-$424,534

Difference between A and B =(-$424,534)-(-$466,932.5)

Difference between A and B =$42398.5

Process B is better as its PW value is smaller than Process A.

7 0

3 years ago

A company has preferred stock with a current market price of $18 per share. The preferred stock pays an annual dividend of 4% ba

scZoUnD [109]

Answer:

Answer:

Dividend (D) = 4% x $100 = $4

Current market price (Po) = $18

Flotation cost (FC) = $1.50

Tax rate (T) = 40% = 0.40

Kp = D

Po-FC

Kp = $4

$18-$1.50

Kp = $4

$16.5

Kp = 0.24 = 24%

Explanation:

Cost of preferred stock equals dividend divided by the difference between current market price and flotation cost. Cost of preferred stock is not tax deductible.

3 0

2 years ago