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Bingel [31]
3 years ago
11

Atlas Corp. is considering two mutually exclusive projects. Both require an initial investment of $10,000 at t = 0. Project S ha

s an expected life of 2 years with after-tax cash inflows of $6,000 and $8,000 at the end of Years 1 and 2, respectively. Project L has an expected life of 4 years with after-tax cash inflows of $4,373 at the end of each of the next 4 years. Each project has a WACC of 9.25%, and Project S can be repeated with no changes in its cash flows. The controller prefers Project S, but the CFO prefers Project L. How much value will the firm gain or lose if Project L is selected over Project S, i.e., what is the value of NPVL - NPVS?a. $56.50b. $62.15c. $68.37d. $75.21e. $82.73
Business
1 answer:
snow_lady [41]3 years ago
7 0

Answer:

A) $56.5

Explanation:

Data:

Project S

Initial cost $10,000

Y1 CF = $6,000

y2 CF = $8,000

Project L

Initial Investment = $10,000

Y1-Y4 CF = $4,373

Solution:

<u>For Project S</u>

We shall prolong the project to four years so it can be easily compared to project L

Following shall be the cashflow stream:

Y0=-$10,000  Y1=$6,000  Y2=-$2,000($8,000 CF - $10,000 outlay for prolonging the project second time)  Y3=$6,000  Y4=$8,000

Now to discount the cashflow

NPV=-10000/(1+0.0925)^0+6000/(1+0.0925)^1-2000/(1+0.0925)^2+6000/(1+0.0925)^3+8000/(1+0.0925)^4

NPV=4033.40

<u>For Project L</u>

In order to calculate present value of the annuity, following formula will be used:

PV=PMT(1+(1/(1+r)^n)/r

<em>NPV = Initial outlay - PV</em>

4373(1+(1/(1+0.0925)^4)/0.0925=14089.9

NPV=-10000+14089.9

NPV=4089.9

Now, we can easily calculate how much value will the firm gain or lose if Project L is selected over Project S

Value=NPV(L)-NPV(S)

Value=4033.40-4089.90

Value=56.50

<em>*all figures are rounded off to two decimal points*</em>

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Answer:

c. cash, checking account balances, and travelers' checks.

Explanation:

Money Supply is the concept that means the amount of the liquid financial products and total currency in the market or economy. It is regulated the macro-economically by the monetary policy. So, there are types of measures of money supply or stock:

-M0: narrowly, it means the hard currency in circulation

-MB: it equals M0+ the hard currency which are not technically in circulation and in bank reserves.

-M1: it is the most common one and equals M0 plus checking accounts plus travelers’ checks and other checkable deposits.

-M2: covers M1 and saving accounts and CDs.

-M3: it surrounds the larger deposits.

-MZM: finally, this indicates the money market deposits.

That’s why we could notice that M1 narrowly means the cash, checking account and travelers’ checks.

5 0
4 years ago
When government policy moves from a budget surplus to a budget deficit and the trade deficit remains constant: savings will decr
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Investment will decline if savings also decline when a government's fiscal policy switches from a budget surplus to a budget deficit and the trade deficit stays steady.

<h3>What occurs if there is a budget surplus or deficit for the government?</h3>
  • A budget deficit occurs when the federal government spends more money than it takes in from taxes in a given year.
  • In contrast, the government has a budget surplus when it collects more taxes than it spends in a single year.
<h3>What distinguishes a budget surplus from a budget deficit?</h3>

A government experiences a budget surplus when its tax revenues exceed its expenditures, a budget deficit when its expenditures exceed its tax revenues, and a balanced budget when the two figures are equal.

<h3>How do trade deficits result from budget deficits?</h3>

A budget deficit causes interest rates to rise, which raises net capital inflows and currency depreciation, which lowers net exports.

learn more about budget surplus and deficit here

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3 0
2 years ago
Which statement describes qualitative research accurately? Question 3 options: Gathering research data that can be quantified an
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Answer: Gathering research data through surveys by asking questions such as “how much? “ or “how many?”

Explanation: Qualitative research methods include interviews, surveys, etc. It is not based upon numerical data, and it is unstructured. Quantitative research is the systematic empirical investigation of observable phenomena via statistical, mathematical, or computational techniques.

Make sure to mark this as brainliest if I helped!

Have a great day :)

3 0
3 years ago
On January 1, Bloomingdale, Inc. borrows $92,000 from First Estate Bank. The loan is due in one year along with 4% interest. The
Thepotemich [5.8K]

Answer:

B. $ 920 increase liabilities, increase expenses

Explanation:

The interest expense for the entire duration of the loan (1 year) may be determined as the product of the interest rate percentage on the principal amount borrowed.

As such, interest for the duration of the loan

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As at the end of the first quarter (March 31), amount of expense to be accrued

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= $920

To account for this,

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Credit Accrued Interest $920

Hence Expense increase as well as liability in form of accrued expense.

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