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statuscvo [17]
3 years ago
9

A car dealer leases a small computer with software for $5,000 per year. As an alterative he could buy the computer for $7,500 an

d lease the software for $3,500 per year. Any time he would decide to switch to some other computer he could cancel software lease and sell the computer for $500.
If he buys the computer nad leases the software, what is the payback period?
a. 3 years
b. 4 years
c. 5 years
d. 6 years
If he kept the computer and software for 8 years, what would be the benefit-cost ratio, based on a 5% interest rate.
a. 1.5
b. 1.4
c. 1.3
d. 1.2
Business
1 answer:
Vilka [71]3 years ago
3 0

Answer:

1. The payback period is:

= 3 years

2. The benefit-cost ratio is:

= 1.1

Explanation:

a) Data and Calculations:

                                   Leasing Computer    Buying Computer &

                                        with Software       Leasing Software

Annual lease payment     $5,000                      $3,500

Cost of computer                                                $7,500

Salvage value of computer                                   $500

Usage period                       8 years                   8 years

Interest rate                         5%                           5%

Present value annuity factor 6.463                    6.463

Present value factor for salvage                        0.677

Present value of annuity    $32,315                $29,782 ($22,621 + $7,500 - 339)

$22,782 = ($3,500 * 6.463 + $7,500 - ($500 * 0.677))

Benefit-cost ratio = $32,315/$29,782 = 1.1

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Using the capital asset pricing model (CAPM), Sun State determined that the required rate of return for a capital budgeting proj
ANTONII [103]

Answer:

2.2

Explanation:

In this question, we apply the Capital Asset Pricing Model (CAPM) formula which is shown below

Expected rate of return = Risk-free rate of return + Beta × (Market rate of return - Risk-free rate of return)

18% = 7% + Beta × 5%

18% - 7% = Beta × 5%

11% = Beta × 5%

So, the beta would be

= 2.2

The (Market rate of return - Risk-free rate of return)  is also known as market risk premium and the same has applied.

5 0
3 years ago
2. The following table provides information about the production possibilities frontier of a Country.(4)
iren [92.7K]

Based on the PPF of the country, if the country were to produce an additional 20 computers at that level, the opportunity cost would be 40 kg of wheat.

If a technological advancement allows for computers to be produced more efficiently, the PPF would expand outwards as shown in the attachment.

<h3>What would be the opportunity cost?</h3>

At the point where this country can produce 10 computers, the amount of wheat it can produce is 400 kg wheat.

If it produces 20 more computers, it will move to the point where it can produce 30 computers and 360 kg of wheat. Opportunity cost would be:

= 400 - 360

= 40 kg wheat.

<h3>What happens due to a technological advancement?</h3>

When there is an improvement in technology, the production capacity of a nation increases. This leads to the production possibilities frontier expanding outward.

Find out more on the production possibilities frontier at brainly.com/question/26685094.

3 0
2 years ago
4
Anna35 [415]

Answer:

Explanation:

B, Reexamine his budget; he had a $500 deficit this month. plato.

3 0
3 years ago
If the demand curve for a life-saving medicine is perfectly inelastic, then a reduction in supply will cause the equilibrium pri
never [62]

Answer:

If the demand curve for a life-saving medicine is perfectly inelastic, then a reduction in supply will cause the equilibrium price to <u>rise and the equilibrium quantity to stay the same</u>.

Explanation:

Perfectly inelastic demand curve indicates the quantity demanded for the life-saving medicine remains the same or does not change in response to a change in price.

Since a part of the law of supply states that the lower the quantity supplied, the higher the price; a reduction in the supply of the life-saving medicine will increase its price.

The combining effect of the two above will lead to an increase in the equilibrium price while the equilibrium quantity will remain the same as it will not respond to the change in price.

The attached graph explains this more clearly. In the graph, the demand curve DD is used to represent the perfectly inelastic demand curve for the life-saving medicine. Therefore, the quantity remains at q no matter the changes, either increase or decrease, in price. Movement from the supply curve S1 to S2 indicates a reduction in supply of the life-saving medicine which causes an increase in the equilibrium price from Po to P1 while the equilibrium quantity stays at q.

This therefore shows that if the demand curve for a life-saving medicine is perfectly inelastic, then a reduction in supply will cause the equilibrium price to <u>rise and the equilibrium quantity to stay the same</u>.

8 0
3 years ago
Prepare the financial statements for Smart Touch Learning for the month of December. Remember that the business started operatio
Rudiy27

Answer:

Smart Touch Learning

1. Income Statement

For the year ended December 31, 2016

Service Revenue                                  $27,600

Salaries Expense                        7,200

Depreciation Expense Furniture   100

Insurance Expense                       350

Utilities Expense                           380

Rent Expense                            2,000

Supplies Expense                          60    10,090

Net income                                            $17,510

2. Statement of Retained Earnings

Net income                   $17,510

Dividends                       (4,600)

Retained earnings       $12,910

3. Balance Sheet

As of December 31, 2016

Assets

Current Assets:

Cash                                             45,710

Accounts Receivable                     1,300

Office Supplies                                350

Prepaid Insurance                        1,050   48,410

Noncurrent assets:

Furniture                                       9,100

Acc. Depreciation - Furniture        (100)   9,000

Total assets                                              57,410

Liabilities and Equity

Current liabilities:

Salaries Payable                                       4,600

Unearned Revenue                                  4,400

Total liabilities                                           9,000

Equity:

Common Stock                                      35,500

Retained earnings                                   12,910

Total equity                                             48,410

Total liabilities and equity                      57,410

4. Statement of Cash Flows

Operating activities:

Net income                    $17,510

Add Non-cash flows:

Depreciation expense        100

Working capital changes:

Accounts Receivable      (1,300)

Office Supplies                 (350)

Prepaid Insurance          (1,050)

Salaries Payable             4,600

Unearned Revenue       4,400

Net operating cash    $23,910

Investing activities:

Furniture                     ($9,100)

Financing activities:

Common Stock          35,500

Dividends                    (4,600)

Net financing cash  $30,900

Net cash flows         $45,710

Explanation:

a) Data and Calculations:

SMART TOUCH LEARNING

Adjusted Trial Balance

December 31, 2016  

Account Title                                 Debit   Credit

Cash                                             45,710

Accounts Receivable                     1,300

Office Supplies                                350

Prepaid Insurance                        1,050

Furniture                                       9,100

Accumulated Depreciation - Furniture        100

Salaries Payable                                        4,600

Unearned Revenue                                  4,400

Common Stock                                      35,500

Dividends                                    4,600

Service Revenue                                   27,600

Salaries Expense                        7,200

Depreciation Expense Furniture   100

Insurance Expense                       350

Utilities Expense                           380

Rent Expense                            2,000

Supplies Expense                          60

Total                                        72,200   72,200

8 0
2 years ago
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