(b) Samuel Gumede earns £39,000 a year working for a building company as aproject manager. He is considering the possibility of leaving the companyand starting his own business. To do this, he will have to use all his £60,000savings that are currently invested at an interest rate of 2%. He estimatesthat the annual profit from his own business will be £50,000. Other relevantcosts in starting his own business amount to £1,750.Required:Using the information above, calculate the net relevant benefit of Samuelstarting his own business.

A business is an organization entirely made for earning profits or for fulfilling social needs by…

Answered: (b) Samuel Gumede earns £39,000 a year…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Similar questions

Laura wants to buy a delivery truck. The truck costs $59,000, and will allow her to increase her after tax profits by $33,000 per year for the next 10 years. She will borrow 98% of the cost of the truck for 10 years, at an interest rate of 6%. Laura's unlevered cost of capital is 11% and her tax rate is 39%. The loan includes a $2,000 application fee. What is the NPV of buying the truck on these terms? Please use the APV method.
Kirk Van Houten, who has been married for 21 years, would like to buy his wife an expensive diamond ring with a platinum setting on their 30-year wedding anniversary. Assume that the cost of the ring will be $13,000 in 9 years. Kirk currently has $4,483 to invest. What annual rate of return must Kirk earn on his investment to accumulate enough money to pay for the ring?
Suppose a husband wants to take his wife on a trip three years from now to Europe to celebrate their 40th anniversary. He has just received a $20,000 inheritance from an uncle and intends to invest it for the trip. The husband estimates the trip will cost $26,600. What interest rate, compounded annually, must be earned to accumulate enough to pay for the trip? Note: Use tables, Excel, or a financial calculator
Laura wants to buy a delivery truck. The truck costs $124,000 , and will allow her to increase her after tax profits by $18,000 per year for the next 10 years. She will borrow 92% of the cost of the truck for 10 years, at an interest rate of 6%. Laura’s unlevered cost of capital is 12% and her tax rate is 35%. The loan includes a $2,000 application fee. What is the NPV of buying the truck on these terms? Please use the APV method.
Michael Scott is 30 years old at the beginning of the year and is thinking about getting an MBA. Michael is currently making $40,000 per year and expects the same for the remainder of his working years (until age 65). If he goes to a business school, he gives up his income for two years and, in addition, pays $20,000 per year for tuition. In return, Michael expects an increase in his salary after his MBA is completed. Suppose that the post-graduation salary increases at a 5% per year and that the discount rate is 8%. What is minimum expected starting salary after graduation that makes going to a business school a positive-NPV investment for Michael? For simplicity, assume that all cash flows occur at the end of each year. This is about time value of money, need excel for formula and solution, u can use shortcut in excel if applicable like PMT NPER and etc.
Suppose a husband wants to take his wife on a trip three years from now to Europe to celebrate their 40th anniversary. He has just received a $24,000 inheritance from an uncle and intends to invest it for the trip. The husband estimates the trip will cost $31,000 and he believes he can earn 8% interest, compounded annually, on his investment. Complete the following table to calculate the future value. Will he be able to pay for the trip with the accumulated investment amount? Note: Use tables, Excel, or a financial calculator. Round your final answers to the nearest whole dollar amount. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1)
Laura wants to buy a delivery truck. The truck costs $142,000 , and will allow her to increase her after tax profits by $33,000 per year for the next 10 years. She will borrow 100% of the cost of the truck for 10 years, at an interest rate of 6%. Laura’s unlevered cost of capital is 15% and her tax rate is 32%. The loan includes a $1,000 application fee. What is the NPV of buying the truck on these terms?
Margaret is planning to invest up to $22,000 in certificates of deposit at City Bank and People's Bank. She wants to invest at least $2000 but no more than $14000 at City Bank. The interest is 6% at City Bank and 7% at People's Bank. This is simple interest for one year. How much should she invest in each bank to maximize her income? What is the maximum income? y
A.)Your client has recently had a baby girl. He wants to set aside his annual bonus at the end of each year to pay her college costs in 18 years. He expects his bonus to be $5,000 per year and thinks he can earn 6% per year. How much will he have saved at the end of 18 years? B.) How much will he have saved at the end of 18 years if his bonus is received at the beginning of each year?
Devin has an opportunity to save $285 per month at an APR of 4.8% in a 401K plan through work. He plans to retire in 25 years. The income taxes are at 32% for him. (1) How much will Devin have deposited into the account by the time he retires? (Express your answer rounded correctly to the nearest cent!) (2) How much interest will Devin have earned on his investment by the time he retires? Use Excel's FV function to help answer this question. (Express your answer rounded correctly to the nearest cent!) 2$ (3) If Devin's company offers a 30% matching contribution, use Excel's FV function to determine how much his investment will be worth when he retires. (Express your answer rounded correctly to the nearest cent!)
Mr. Waleed is 25 years old and he has just started his career in the field of Marketing. Waleed has a long-term goal of purchasing his dream house at a age of 40 years, which is costing him OMR 150,000. Currently Waleed has inherited OMR 25,000 from his parents. Waleed has two options available for him as follows; Option 1 – Invest his money at compound interest rate of 10 % Semi Annually Option 2 – Invest his money at a compound interest rate of 8% Quarterly A. Compute the values under both option at the age of 40 years and advice which is the most suitable option to reach his goal? B. As of today, Waleed’s dream house is costing him OMR 150,000. Will the value be the same in 40 years’ time? Explain?
Kirk Van Houten, who has been married for 23 years, would like to buy his wife an expensive diamond ring with a platinum setting on their 30-year wedding anniversary. Assume that the cost of the ring will be $10 comma 000 in 7 years. Kirk currently has $4 comma 524 to invest. What annual rate of return must Kirk earn on his investment to accumulate enough money to pay for the ring?

Recommended textbooks for you

FINANCIAL ACCOUNTING

Accounting

ISBN:

9781259964947

Author:

Libby

Publisher:

MCG

Accounting

ISBN:

9781337272094

Author:

WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.

Publisher:

Cengage Learning,

Accounting Information Systems

Accounting

ISBN:

9781337619202

Author:

Hall, James A.

Publisher:

Cengage Learning,

FINANCIAL ACCOUNTING

Accounting

ISBN:

9781259964947

Author:

Libby

Publisher:

MCG

Accounting

ISBN:

9781337272094

Author:

WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.

Publisher:

Cengage Learning,

Accounting Information Systems

Accounting

ISBN:

9781337619202

Author:

Hall, James A.

Publisher:

Cengage Learning,

Horngren's Cost Accounting: A Managerial Emphasis…

Accounting

ISBN:

9780134475585

Author:

Srikant M. Datar, Madhav V. Rajan

Publisher:

PEARSON

Intermediate Accounting

Accounting

ISBN:

9781259722660

Author:

J. David Spiceland, Mark W. Nelson, Wayne M Thomas

Publisher:

McGraw-Hill Education

Financial and Managerial Accounting

Accounting

ISBN:

9781259726705

Author:

John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles

Publisher:

McGraw-Hill Education

SEE MORE TEXTBOOKS