27. Decision making. A group of entrepreneurs is consider-ing the purchase of a fast-food franchise. Franchise Apredicts that it will bring in a constant revenue streamof $80,000 per year for 10 yr. Franchise B predicts thatit will bring in a constant revenue stream of $95,000per year for 8 yr. Based on a comparison of accumulatedpresent values, which franchise is the better buy, assum-ing the interest rate is 4.1%, compounded continuously,and both franchises have the same purchase price?

The future value of an annuity with continuous compounding is the formula that measures the future…

Answered: 27. Decision making. A group of…

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Latin Cuisine is considering the purchase of new food processing technology, which would cost $1,800,000 and would generate $300,000 in annual cost savings. No salvage is expected on the technology at the end of its 10- year life. The firm's cost of capital and discount rate are both 10 percent. a. Calculate the internal rate of return for the project. Note: Round percentage to one decimal point (i.e. round 4.555% to 4.6%). 18.5 * %
1. Your client has been offered the opportunity to invest in a project which will pay $1,000 per month at the end of months 1 to 10 and $2,000 per month at the end of months 21 to 30. The interest rate over the period of the investment is a nominal rate of 8% p.a. If your client can buy the investment today for $25,000 would you recommend that this is a good investment? Why or why not?
7. What is the payback period? ?
ou are preparing to produce some goods for sale. You will sell them in one year and you will incur costs of $ 76,000 immediately. If your cost of capital is 7%. What is the minimum dollar amount you need to sell the goods for in order for this to be a non-negative NPV? Question content area bottom Part 1 The minimum dollar amount is $XXX enter your response here .
you want to invest in a new technology, which cost now $100.000. In 4-year long-term, it gives you $30.000 in the first year. And then in the, second year $32 000. and in the third year $20 000, then $60000. The cost of financing 12%. (a) How much is the NPV. (b) How much is the PI
6
VI. Lucid was considering purchasing a small business. If it invests the amount of $500,000 for the purchase, the expected annual gross return of investing is $25,000. Assuming that the business does not change in value and that the annual interest rate remains constant, calculate the annual cost when the interest rate is 12% and when it is 3%. b. (t) Determine if the investment is good at each value of the interest rate. a.
Please don't use hend raiting and step by step solutions
betty's bakery is planning for future expansion. the company estimates that i will need 59,500 to purchase a new commercial oven 5 years from now. assuming a 2% annual interest rate compounded annually, use the pv function in excel or a financials calculator to determine how much betty's must invest today to have 59,500 5 years from now on. present value=??
You are analyzing a property that popped up on CREXI. Real estate taxes and management services cost 42,362 and 31,563, respectfully. Other expenses are 15,369. If your company’s required return is 10%, what must the average annual rent be over the next five years for you to purchase the property at $400,000 and obtain that 10%? Expenses grow at 2.5% per year. A. 189,500 B. 198,400 C. 201,300 D. 192,700 E. 209,500
Minden Co. is considering buying new computer software that will assist customers in their product choices. The cost is $50,000. The benefit will be an additional cash inflow of $25,000 for four years, at which point the software will need replacing with a more modern version. The return on average investment is _______________. Question 15 options: 25.0% none of the options 42.5% 50.0% 30.0%

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