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pshichka [43]
3 years ago
10

Kermit plans to open a boutique. The initial investment is $10,000. He has to spend $1,500 in annual operations and maintenance.

The boutique generates $3,000 in revenues every year. Kermit uses a 10 year planning horizon and a MARR of 12%. The correctly calculated Rate of Return for this project is ________________%.
Business
2 answers:
bekas [8.4K]3 years ago
7 0

Year Initial Annual Maintenance Annual Revenue Total Cash Flow

0 -$10,000 -$10,000

1 -$1,500 $3,000 $1,500

2 -$1,500 $3,000 $1,500

3 -$1,500 $3,000 $1,500

4 -$1,500 $3,000 $1,500

5 -$1,500 $3,000 $1,500

6 -$1,500 $3,000 $1,500

7 -$1,500 $3,000 $1,500

8 -$1,500 $3,000 $1,500

9 -$1,500 $3,000 $1,500

10 -$1,500 $3,000 $1,500

Internal Rate of Return 8.1442% [IRR() in excel]

The rate of return is 8.1442 which is less than MARR of 12% investment is not worth it

Setler [38]3 years ago
3 0

Answer:

8.14

Explanation:

The Rate of Return is 8.14 from my calculations which you can find in the attached file.

Now since the Rate of return is 8.14. Which is less than MARR of 12%, it shows that investment is not good.

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Corporate bond A has a 6 percent coupon and matures in 3 years. Corporate bond B has a 6 percent coupon and matures in 15 years.
babymother [125]

Answer:

New price of bond A = $986.76, this means that the price decreased by $13.24 or 1.32%.

New price of bond B = $952.99, this means that the price decreased by $47.01 or 4.7%.

Explanation:

Since the current market interest is 6%, then both coupons A and B are sold at face value. If the market interest increases to 6.5%, then

New price of bond A:

PV of face value = $1,000 / (1 + 6.5%)³ = $827.85

PV of coupon payments = $60 x 2.64848 (PV annuity factor, 6.5%, 3 periods) = $158.91

New price of bond A = $986.76, this means that the price decreased by $13.24 or 1.32%.

New price of bond B:

PV of face value = $1,000 / (1 + 6.5%)¹⁵ = $388.83

PV of coupon payments = $60 x 9.40267 (PV annuity factor, 6.5%, 3 periods) = $564.16

New price of bond B = $952.99, this means that the price decreased by $47.01 or 4.7%.

8 0
2 years ago
A store and a bank would both charge fees for?
salantis [7]
<span>They may charge for any late payments

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7 0
3 years ago
A five-year bond has a par value of 1000, a coupon of 3%, and a required yield of 5%. What should be the market price of this bo
Dmitrij [34]

Answer:

The market price of the bond is $913.41

Explanation:

The coupon payment is annual, meaning it is being paid once a year.

N(Number of years/Number of periods) = 5

I/Y(Yield-To-Maturity) = 5 percent

PMT(coupon payment) = $30 [(3/100) x $1,000]

FV(Future value/Par value) =$1,000

PV(present value or market value) = ?

Now to solve this, lets use a financial calculator (e.g Texas BA II plus)

N= 5; I/Y = 5%; PMT = $30; FV = $1,000; CPT PV = -$913.41

Therefore, the market price of the bond is $913.41

4 0
2 years ago
If a purely competitive firm is currently facing a situation where the price of its product is lower than the average variable c
Daniel [21]

Answer: B) the firm will shut down in the short run, but stay in the industry in the long run if it expects the product price to rise high enough soon.

Explanation:

If a purely competitive firm is currently facing a situation where the price of its product is lower than the average variable cost, but it believes that the market demand for its product will increase soon, then the firm will shut down in the short run, but stay in the industry in the long run if it expects the product price to rise high enough soon.

7 0
3 years ago
Read 2 more answers
The following information is available for completed Job No. 402: Direct materials, $120000; direct labor, $180000; manufacturin
Korvikt [17]

Answer:

ending inventoryt (inventory at hand)  <u> 102,500</u>

Explanation:

First we calculate the total cost for the Job:

Materials     120,000

Labor           180,000

Overhead  <u>  110,000  </u>

Total cost    410,000

Then we distribute over the units produced to calculate the unit cost:

Units Produced 4,000

total cost 410,000 / units produced 4,000 =<u> 102.5 unit cost</u>

Now we calcualte the value fo the units at hand:

<u>unit at hand refers to ending invnetory</u>

we produce 4,000 we sale 3,000 ending inventory 1,00

ending inventory : 1,000 x 102.5 = 102,500

5 0
3 years ago
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