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MakcuM [25]
3 years ago
12

Folsom Advertising, Inc. is considering an investment in a new information system. The new system requires an investment of $1,8

00,000 and either has
a. Even cash flows of $750,000 per year or
b. The following expected annual cash flows: $450,000, $225,000, $600,000, $600,000, and $150,000.

Required:
Calculate the payback period for each case
Business
1 answer:
sveticcg [70]3 years ago
5 0

Answer:

Payback period=2 years 5  months

Payback period=3 years  8 months

Explanation:

<em>The payback period is the estimated length of time in years it takes  .</em>

<em>It is the number of years it takes the cash project to break-even</em>

a) Payback period

Total cash flow for two years = 750×  2 = 1500.000

Balance of cash flow required to make up= 1800000- 1500,000  300,000

Payback period = 2 years + 300,000/750,000× 12 months=  2 years 5  months

Payback period=2 years 5  months

b) Payback period

Total cash flow for 3 years = 450,000 + $225,000 +600,000=1,275 ,000

Balance o cash required to make up 1800,000 = 1,800,000 -1275,000= 525,000

Pay back period = 3 years + 525,000/750,000×  12 months

                            = 3 years  8 months

Payback period=3 years  8 months

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Answer:

d. 9 percent

Explanation:

After 2 years the value of $10,000 at present time =

$10,000 * (1 + x / 100)^2 = $12,000

(1 + x / 100)^2 = 12,00 / 10,000

(1 + x / 100)^2 = 1.2

The square root of 1.2 is 1.0954

(1 + x / 100) = 1.0954

x = 9.54

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7 0
2 years ago
For each scenario, decide whether it creates a producer or a consumer surplus. Then, calculate the ensuing surplus.
Gnom [1K]

Answer:

Alice's consumer surplus =  $5

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Explanation:

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Consumer surplus = willingness to pay - price of the good

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Producer surplus = price of the good - least price the producer is willing to accept

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Jeff's consumer surplus = $20 - [$16 - (0.75 x $16)] = $16

Nicole's producer surplus = $501 - $500 = $1

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