Answer:
a. $265,336
Explanation:
we are told to calculate which amount will make both payments equal:
- payment 1 = $1,000,000 in 5 years
- payment 2 = $500,000 now + ? in 5 years
in order to be able to compare them, we must determine the value of the $500,000 paid now in 5 years:
future value = present value x (1 + interest rate)ⁿ
future value = $500,000 x (1 + 0.08)⁵ = $734,664
$1,000,000 = $734,664 + ?
? = $1,000,000 - $734,664 = $265,336
Answer:
a-1. NPV for the project is $8,381,576.17
a-2. A. Yes. Accept the Project.
b. 40.84 % and 40.84 %
Explanation:
The Net Present Value can be determined using a Financial Calculator as follows :
-38,600,000 CFj
62,600,000 CFj
- 11,600,000 CFj
11 % I/YR
Shift NPV $8,381,576.17
A Company should accept projects that have a positive Net Present Value.Therefore, Accept this project.
Calculation of the Internal Rate of Return using a Financial Calculator :
-38,600,000 CFj
62,600,000 CFj
- 11,600,000 CFj
Shift IRR 40.84 %
Answer:
b. small percentage changes in the price will lead to much larger percentage changes in the quantity demanded.
Explanation:
Price elasticity of demand is a measure of how responsive is quantity demanded to change in price. Its formula is given by:
= 
= % Change in Quantity Demanded / % Change in Price
So when absolute value is greater than 1, a x percentage change in price will lead to larger than x percentage change in quantity demanded.
<u>Note</u>: Whether the percentage change in quantity demanded will be just a little or very much larger than percentage change in price will depend on how much is larger than 1. But b is the still the best answer among the options.
Answer:
14.29% or higher
Explanation:
Municipal bonds interest rates are tax free. Corporate bond rates however are have tac benefits through tax shield.
The formula for aftertax corporate bond rate = pretax rate(1-tax)
pretax rate = 7% or 0.07 as a decimal
aftertax rate(to be indifferent between the two) = 6% or 0.6
In order to be indifferent, the tax rate would be;
0.07 ( 1- tax ) = 0.06
0.07 - 0.07tax = 0.06
0.07 - 0.06 = 0.07tax
0.01 / 0.07 = tax
tax = 0.1429 or 14.29%
Therefore, Investors with a tax rate of 14.29% or higher would prefer the municipal bond.
Answer:
The answer is A. the production of the 100th unit of output increases the firm's profit by $3
Explanation:
ans is Production of the 100th unit of output increases the firm's profit by $3.
