Assume that Hogan Surgical Instruments Co. has $2,700,000 in assets. If it goes with a low-liquidity plan for the assets, it can earn areturn of 15 percent, but with a high-liquidity plan, the return will be 11 percent. If the firm goes with a short-term financing plan, thefinancing costs on the $2,700,000 will be 7 percent, and with a long-term financing plan, the financing costs on the $2,700,000 will be9 percent.a. Compute the anticipated return after financing costs with the most aggressive asset-financing mix.Anticipated return$160,000b. Compute the anticipated return after financing costs with the most conservative asset-financing mix.Anticipated return$40,000c. Compute the anticipated return after financing costs with the two moderate approaches to the asset-financing mix.Anticipated ReturnLow liquidityHigh liquidity

Information Provided: Assets = $2,700,000 Return = 15% (low liquidity plan) Return = 11% (high…

a. Compute the anticipated return after financing costs with the most aggressive asset-financing mix. Anticipated return 160,000 b. Compute the anticipated return after financing costs with the most conservative asset-financing mix. Anticipated return 40,000 c. Compute the anticipated return after financing costs with the two moderate approaches to the asset-financing n Anticipated Return Low liquidity High liquidity

a. Compute the anticipated return after financing costs with the most aggressive asset-financing mix. Anticipated return 160,000 b. Compute the anticipated return after financing costs with the most conservative asset-financing mix. Anticipated return 40,000 c. Compute the anticipated return after financing costs with the two moderate approaches to the asset-financing n Anticipated Return Low liquidity High liquidity

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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Concept explainers

Production Budget

A budget can be defined as a financial plan designed by an undertaking for a definite period in the future that can contribute towards enhancing the financial success of the business undertaking. It is used to estimate the revenue and expenses. The budget generally takes into account both current and future income and expenses.

Question

Assume that Hogan Surgical Instruments Co. has $2,700,000 in assets. If it goes with a low-liquidity plan for the assets, it can earn a
return of 15 percent, but with a high-liquidity plan, the return will be 11 percent. If the firm goes with a short-term financing plan, the
financing costs on the $2,700,000 will be 7 percent, and with a long-term financing plan, the financing costs on the $2,700,000 will be
9 percent.
a. Compute the anticipated return after financing costs with the most aggressive asset-financing mix.
Anticipated return
$
160,000
b. Compute the anticipated return after financing costs with the most conservative asset-financing mix.
Anticipated return
$
40,000
c. Compute the anticipated return after financing costs with the two moderate approaches to the asset-financing mix.
Anticipated Return
Low liquidity
High liquidity

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Computing Present and Future Values Under Different Assumptions Determine the unknown variables in each of the four separate investment scenarios. Round the RATE to one percentage point (for example, enter 8.5 for 8.54444%). Round NPER, PV, and PMT to the nearest whole number. Use a negative sign only for an amount related to PMT. Investment 1 Investment 2 Investment 3 Investment 4 RATE Answer 7% 6% 1% NPER 10 Answer 4 24 PV $216,000 $9,000 Answer $21,600 PMT $(35,000) $(2,300) $(16,200) Answer TYPE End of period Beg. of period End of period Beg. of period
Which of the following statements is true regarding the payback period? Multiple Choice It measures the length of time that it takes for a project to recover its initial cost from the discounted net cash inflows that it genera It measures the length of time that it takes for a project to recover its initial cost from the net cash inflows that it generates. It measures the length of time that it takes for a project to recover its initial cost from the incremental net operating income that It measures the length of time that it takes for a project to recover its initial cost from the discounted incremental net operating it generates.
If a low cash flow this year makes a low cash flow next year more likely to occur, this means the project cash flows tend to be _____________. a. more predictable b. independent of each other c. more volatile d. Correlated
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