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lilavasa [31]
3 years ago
15

Norman Dowd owns his own taxi, for which he bought a $11,400 permit to operate two years ago. Mr. Dowd earns $34,200 a year oper

ating as an independent but has the opportunity to sell the taxi and permit for $41,000 and take a position as dispatcher for Carter Taxi Co. The dispatcher position pays $32,000 a year for a 40-hour week. Driving his own taxi, Mr. Dowd works approximately 55 hours per week. If he sells his business, he will invest the $41,000 and can earn a 9 percent return.
Required:
a. Determine the opportunity cost of owning and operating the independent business.
b. Calculate the earnings of Norman Dowd operating as an independent and the earnings of Norman Dowd working as a dispatcher. Based solely on financial considerations, should Mr. Dowd sell the taxi and accept the position as dispatcher?
Business
1 answer:
andriy [413]3 years ago
4 0

Answer and Explanation:

The computation is shown below:-

a. Opportunity cost = $41,000

b

Working as dispatcher = Dispatcher pays + (Earn Percentage return × Opportunity cost)

= $32,000 + (9% × $41,000)

= $32,000 + $3,690

= $35,690

 Yes, Mr Dowd would sell the taxi and accept the position as a role of dispatcher

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Answer:

the weighted average cost of capital is 11.57 % .

Explanation:

Market Value of Equity = Number of Common Shares Outstanding × Market Price per share

                                      = 30,000 shares × $15

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Market Value of Debt = Face Value × 82%

                                    = $280,000 × 82%

                                    = $229,600

WACC = Ke × (E/V) + Kd × (E/V)

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3 years ago
Deon is opening a car wash, and he has approached SCORE, a SBA organization that assists small-business owners in setting up the
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3 years ago
Suppose you are going to receive $13,200 per year for five years. The appropriate interest rate is 8.1 percent.
sertanlavr [38]

Answer:

a-1) Pv = 52549

a-2) Pv = 56822

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b-2 Fv = 83878

Explanation:

b-1) Future value:

S= Sum of amount of annuity=?

n=number of fixed periods=5 years

R=Fixed regular payments=13200

i=Compound interest rate= .081 (suppose annualy)

we know that ordinary  annuity:

S= R [(1+i)∧n-1)]/i

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    =13200(1.476-1)/.081

    = 13200 * 5.8765

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Formula: Present value = C* [(1-(1+i)∧-n)]/i

                                  =13200 * [(1-(1+.081)∧-5]/.081

                                 =13200 * (1-.6774)/.081

                                =13200 * (.3225/.081)

                                =52549

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Formula : Present value = C * [(1-(1+i)∧-n)]/i   *  (1+i)

                                    =  13200 * [(1- (1+.081)∧-5)/.081   * (1+.081)

                                 = 13200  * 3.9822 *  1.081

                               =  56822

b-2) Future value=?

we know that:         S= R [(1+i)∧n+1)-1]/i ]  -R

                             = 13200[ [ (1+.081)∧  5+1 ]-1/.081]   - 13200

                           = 13200 (.5957/.081)   -13200

                         = (13200 * 7.3544)-13200

                         = 97078  -  13200

                       =  83878

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