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Alex
3 years ago
14

Corporation is considering a capital budgeting project that would require an initial investment of $350,000. The investment woul

d generate annual cash inflows of $133,000 for the life of the project, which is 4 years. At the end of the project, equipment that had been used in the project could be sold for $32,000. The company's discount rate is 14%. The net present value of the project is closest to:_____.
a. $214,000.
b. $37,429.
c. $56,373.
d. $406,373.
Business
1 answer:
mezya [45]3 years ago
7 0

Answer:

The value is closet to option C.

Explanation:

Below is the given values:

Initial investment amount = $350000

Annual cash generated = $133000

Time period = 4 years

Salvage value = $32000

Interest rate = 14%

Net present value = Annual cash(P/A , r, n) + Salvage value (P/F, r, n) -Initial investment

Net present value = 133000 (P/A, 14%, 4) + 32000(P/F, 14%, 4) - 350000

Net present value = 133000 (2.9137) + 32000(0.59) - 350000

Net present value = $56402.1

The value is closet to option C.

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If a couple plans to stay at a hotel for a week on the beaches of tulum, mexico, and it costs 7,000 pesos, _____.
alina1380 [7]
<span>with an exchange rate of 11 pesos per dollar, the hotel stay will cost $636.36</span>
4 0
3 years ago
Landis Company is preparing its financial statements. Gross margin is normally 40% of sales. Information taken from the company'
tatiyna

Answer:

$5,000= ending inventory

Explanation:

Giving the following information:

Gross margin is normally 40% of sales.

Sales= $25,000

beginning inventory= $2,500

purchases= $17,500

First, we need to determine the cost of goods sold:

COGS= 25,000*0.6= 15,000

Now, using the following formula, we can calculate the ending inventory:

COGS= beginning inventory + cost of goods purchased - ending inventory

15,000= 2,500 + 17,500 - ending inventory

5,000= ending inventory

5 0
3 years ago
You work for a pharmaceutical company that has developed a new drug. The patent on the drug will last 1717 years. You expect tha
jeka57 [31]

Answer:

Present value = $45,185,606

Explanation:

Data:

number of periods(n) = 17 years

First-year profit = $5 million

Growth rate = 2%

Interest rate = 10%

Present value = ?

Solution:

The present value of the growing annuity can be calculated as follows

Formula:

Let's denote

annual interest rate = x

annual growth rate = y

Present value = First-year profit x (\frac{1-(\frac{1+y}{1+x} )^{n} }{x-y} )

Present value = $5,000,000 x (\frac{1-(\frac{1+0.02}{1+0.1} )^{17} }{0.1-0.02} )

Present value = $5,000,000 x 9.03

Present value = $45,185,606

7 0
4 years ago
Best Foods, Inc. has an unlevered cost of capital of 10 percent. The company generates EBIT of $4,250 per year and has a tax rat
avanturin [10]

Answer:

The value of the levered firm $31,125

Explanation:

Value of Firm is the value of present value of expected future earning. It is calculated by dividing the earning after tax by the cost of capital while considering that the business will operate for the foreseeable future time.

EBIT                      $4,250.00

Less

Interest                 <u>$0.00        </u>

EBT                       $4,250.00

Tax 35% x 4250  <u>$1,487.50</u>

EAT                       <u>$2,762.50</u>

Cost of Capial       10%

Value of firm = EAT / Cost of Capital = $2,762.5 / 10% = $27,625

Debt after tax = $10,000 x ( 1 - 0.35 ) = $6,500

Value of Equity = Value of firm - Debt after tax = $27,625 - $6,500 = $21,125

Value of debt = $10,000

Value of levered Firm = $21,125 + $10,000 = $31,125

3 0
4 years ago
The gdp deflator is used to calculate the inflation rate. True or False
Aleksandr [31]

Answer:

True

Explanation:

The nominal GDP is divided by the real GDP to calculate GDP deflator which is used to calculate the CPI and Inflation rate. So it is true that the GDP delfator is used to calculate inflation rate.

6 0
3 years ago
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