Answer:
d. Choose Option B because it has a higher NPV
Explanation:
The computation is shown below:
For Option A:
Investment = $10 million
Present Value of cash flows = Cash flow ÷ Discounting rate
= $2 ÷ 10%
= $20 million
Now
NPV = $20 - $10
= $10 million
We know that
IRR is the rate at which the NPV will be zero
So, 2 ÷ r - 10 = 0
r = 20%
For Option B:
Investment = $50 million
Present Value of cash flows = $6.5 ÷ 10% = $65 million
NPV = $65 - $50 = $15 million
we know that
IRR is the rate at which the NPV will be zero
So, 6.5÷ r -50 = 0
r = 13%
Based on NPV, Option B should be selected as it contains higher NPV as compared to option A.
However, Based on IRR, Option A should be chosen as it contains higher IRR and a higher IRR represent a higher profit percentage
Answer:
The most sensible position is to understand that theory, while not practical in itself, can be immensely helpful when dealing with pratical matters.
This is because theory gives you a sound conceptual foundation that can be used to analyze the practical context, and approach it with the best possible practical solutions.
Without theory, managers have to rely too much on intuition, which can often fail.
Answer:
Effect on income= $2,000 decrease
Explanation:
Giving the following information:
Selling price= $10 per unit.
Variable costs are $4 per unit
A move to a larger facility would increase rent expense by $8,000, and allow the company to meet its demand for an additional 1,000 units.
We need to calculate the effect in the income of moving to a larger facility.
Effect on income= total contribution margin increase - increase in fixed costs
Effect on income= 1,000*(10 - 4) - 8,000
Effect on income= $2,000 decrease
Answer:
5.79%
Explanation:
For the computation of current yield first we need to find the annual coupon is shown below:-
Annual Coupon = Coupon payment × Semi annual
= $28.25 × 2
= $56.5
Current Yield = Annual Coupon ÷ Market Price
= $56.5 ÷ $975.11
= 0.0579
or
= 5.79%
Therefore for computing the current yield we simply applied the above formula so that the correct rate could come
<span>Yooshuh is in the process of strategic planning. She is developing the companies short term goals, those things that she believes can be reached within the next year as well as identifying the milestone dates to which she thinks these can be achieved.</span>
