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Alenkasestr [34]
3 years ago
11

g Peng Company is considering an investment expected to generate an average net income after taxes of $2,700 for three years. Th

e investment costs $55,500 and has an estimated $11,400 salvage value. Assume Peng requires a 10% return on its investments. Compute the net present value of this investment. (FV of $1, PV of $1, FV of $1 an PVA of $1) (Use appropriate factor(s) from the tables provided.) (Negative amounts should be indicated by a minus sign.)
Business
1 answer:
nikdorinn [45]3 years ago
6 0

Answer:

Net Present value = -$40,221

Explanation:

The net present value is the sum of the discounted cash-flows over the life of the project from t=0 to t=n.

Year  Cash-flow PVIF       Present Value

0           (55,500)   1.0000    (55,500)

1               2,700    0.9091       2,455  

2              2,700    0.8264      2,231  

3              2,700    0.7513       2,029  

3             11,400     0.7513       <u>8,565  </u>

        Net Present value       (40,221)

The salvage value is treated as a cash-flow at the end of year 3 as that's the last year in which the project records a cash inflow. In this question, a negative net present value implies that the project is not profitable, and should therefore not be undertaken.

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Answer:

Pose-for-Pics

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Date     Account Title               Debit     Credit

Aug. 1   Common stock       $7,400

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Aug. 31 Balance                                  $6,896

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Aug. 1   Cash                                 $7,400

Aug. 1   Photography equipment 34,400

Aug. 31 Balance             $41,800

Photography Equipment

Date     Account Title        Debit     Credit

Aug. 1   Common stock    $34,400

Prepaid Insurance

Date     Account Title        Debit     Credit

Aug. 1   Cash                   $3,000

Office Supplies

Date     Account Title        Debit     Credit

Aug. 1   Cash                    $970

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Aug. 20 Cash                                 $4,231

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Date     Account Title        Debit     Credit

Aug. 31 Cash                    $765

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As of August 31

Account Title          Debit     Credit

Cash                     $6,896

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Photography fees                  4,231

Utilities expense      765

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Explanation:

Before transactions are posted to the T-accounts (General Ledger) they are recorded in the General Journal.  The T-accounts summarize the transactions into various ledger accounts.  Periodically, the accounts are balanced and a trial balance is extracted to check if the posting is error-free.

6 0
2 years ago
You were hired as a consultant to Quigley Company, whose target capital structure is 35% debt, 10% preferred, and 55% common equ
alexgriva [62]

Answer:

A. 8.15

Explanation:

WACC is the firm's weighted average cost for the capital that is employed from different sources which includes common equity, preferred equity and debt.

In order to calculate WACC, the weighted average cost of each capital is added, so the formula becomes:

WACC = (E x %E) + (D x (1 - Tax) x %D) + (PE x %PE)

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PE = Preferred equity

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Using the above formula we can calculate WACC

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