Answer:
2.85405 years
Explanation:
Cash Flows
Year 0 ($78,000)
Year 1 $29,500
Year 2 $32,700
Year 3 $18,500
Year 4 $10,000
Services United would receive $29,500 in year 1 therefore remaining balance is = 78,000 - 29,500 = 48,500
Services United would receive $32,700 in year 2 therefore remaining balance is = 48,500 - 32,700 = 15,800
Services United would receive $18,500 in year 3 therefore remaining balance is = 15,800 - 18,500 = -2700
We observe that the company would recover the initial amount somewhere in year 3
15800 / 18500 = 0.85405 years
Total payback period = 2 years + 0.85405 years = 2.85405 years
I think it's False
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Answer:
PV of cash outflows = Annuity*(1-1/(1+rate)^number of terms)/rate
= 5000000000*(1-1/(1+9%)^6)/9%
= 22429592951.15
PV of inflows at end of 6 years= Annuity*(1-1/(1+rate)^number of terms)/rate
= 200000000*(1-1/(1+9%)^100)/9%
= 2221820304.00
PV of inflows now = 2221820304/1.09^6 = $1,324,798,853.47
NPV = -22429592951.15+1324798853.47
= -21104794098
We see that the Net Present value added by this method is negative. Hence the project is not beneficial.
Purchased shares = 680 shares * $11.00 ($7,480)
Year-end shares worth = 680 shares * $2.20 ($1,496)
Loss of shares = $7,480 - $1,496 ($5,984)
OR
Loss in shares price= $11.00 - $2.20 ($8.80)
Loss of shares = 680 shares * $8.80 ($5,984)
Barney can deduct $5,984 as the amount of loss of this year.
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