Helen just graduated from college. Since she is starting her own business, it's time to upgrade from her clunker to a reliablevehicle. Helen has the option to purchase a new car for her business at a cost of $17,612 (life of 7 years with no salvage value),estimating that it would help her bring in additional annual net operating cash flows of $7,400 over the life of the car.Determine the simple payback period and the IRR for this investment. Helen expects her business income to be subject to a 30%tax rate. (Round simple payback period to 3 decimal places, e.g. 15.256 and IRR to 2 decimal places, e.g. 15.25%. Round intermediatecalculations to 2 decimal places, e.g. 15.25.)Simple payback periodIRRyears%

The simple payback period is the time it takes for an investment to recover its initial cost from…

Answered: Helen just graduated from college.…

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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3. Your favorite neighbor Poindexter learns you are pursuing an MBA and seeks your advice on how to finance his next vehicle. He has gathered information about each option but is not sure how to compare the alternatives. Purchasing a new vehicle will cost $26,500, and he expects to spend about $500 per year in maintenance costs. He would keep the vehicle for five years and estimates that the salvage value will be $10,500. Alternatively, Poindexter could lease the same vehicle for five years at a cost of $5,000 per year, including all maintenance. The lease payments are made at the beginning of each year. Assume a discount rate of 10%. o Provide an analysis for Poindexter at 10%. o Provide the same analysis for good old Poindexter assuming a rate of 5%. At what rate will he be indifferent? o
Ruth just graduated from college. Since she is starting her own business, it's time to upgrade from her clunker to a reliable vehicle. Ruth has the option to purchase a new car for her business at a cost of $21,528 (life of 7 years with no salvage value), estimating that it would help her bring in additional annual net operating cash flows of $10,400 over the life of the car. Determine the simple payback period and the IRR for this investment. Ruth expects her business income to be subject to a 30% tax rate. (Round simple payback perlod to 3 decimal places, eg. 15.256 and IRR to 2 decimal places, eg. 15.25%. Round Intermediate calculations to 2 decimal places, eg. 15.25) Simple payback period IRR years. %
Che-Che bought his brother a laptop 5 years ago which has a cost of around 25,000PhP. The laptop’s life span will last until 5 years. She has a friend which is a computer technician who advised her that the laptop’s life span could extend until 10 years if she could spend semi-annual maintenance of 100Php with a 10Php increase rate starting the next period of maintenance inspection. How much is the total future cost assuming that the money will have a rate of 2% compounded semi-annually if she decided to enjoy using her laptop beyond the expected life span upon purchasing?
Rachel purchased a car for $17,500 three years ago using a 4-year loan with an interest rate of 10.8 percent. She has decided that she would sell the car now, if she could get a price that would pay off the balance of her loan. What is the minimum price Rachel would need to receive for her car? Calculate her monthly payments, then use those payments and the remaining time left to compute the present value (called balance) of the remaining loan.
Caleb buys a new laptop and decides to depreciate the value of the laptop by the reducing balance method. Caleb's equation for the value of the laptop after n years is tn = 2530x 0.921^n-1 a) Calculate the original price of the laptop. b) What is the annual rate of depreciation from the laptop? c) Determine the value of the laptop after 3 years.
Marcus is considering a purchase of a new Toyota that costs $20,000 at a local dealership. Marcus estimates the annual cost of maintenance, registration, insurance, and gas to be about $1,500. After extensive internet research, Marcus estimates that he can sell his Toyota in three years for $10,000. What is Marcus's estimated cost of owning and driving the car for three years? $20,000 3 x $1,500+$20,000-$24,500 3x $1,500+$20,000 $10,000 $14,500 $20,000 $10,000 = $10,000
Helga is considering the purchase of a small restaurant. The purchase price listed by the seller is $920,000. Helga has used past financial information to estimate that the net cash flows (cash inflows less cash outflows) generated by the restaurant would be as follows: Years 1-6 7 8 9 10 Amount $ 92,000 82,000 72,000 62,000 52,000 If purchased, the restaurant would be held for 10 years and then sold for an estimated $820,000. Required: Determine the present value, assuming that Helga desires a 10 % rate of return on this investment. (Assume that all cash flows occur at the end of the year.) Note: Do not round intermediate calculations. Round your final answers to nearest whole dollar amount. Use tables, Excel, or a financial calculator. (FV of $1. PV of $1. FVA of $1. PVA of $1. FVAD of $1 and PVAD of $1) Future Amount $ 92,000 10% 82,000 10% 72,000 10% 62,000 10% 52,000 10% 820,000 10% n= Present Value Should the restaurant be purchased?
Jose and his friend invest in a machine for their business that costs P1,200,000.00. The machine has an economic life of 10 years and has a salvage value of P110,000.00. what is the book value on 6th year. Use the SYD method
Sara bought a car last year for $12,000. She knows the car depreciates in value 10% per year. Will the car be worth more than $5,000 in 10 years? Explain your thinking.
Helga is considering the purchase of a small restaurant. The purchase price listed by the seller is $890,000. Helga has used past financial information to estimate that the net cash flows (cash inflows less cash outflows) generated by the restaurant would be as follows: Years 1-6 7 8 9 10 Amount $ 89,000 79,000 69,000 59,000 49,000 If purchased, the restaurant would be held for 10 years and then sold for an estimated $790,000. Required: Determine the present value, assuming that Helga desires an 11% rate of return on this investment. (Assume that all cash flows occur at the end of the year.)
Tony and Suzie see the need for a rugged all-terrain vehicle to transport participants and supplies. They decide to purchase a used Suburban on July 1, 2025, for $12,000. They expect to use the Suburban for five years and then sell the vehicle for $4,500. The following expenditures related to the vehicle were also made on July 1, 2025: The company pays $1,800 to GEICO for a one-year insurance policy. • The company spends an extra $3,000 to repaint the vehicle, placing the Great Adventures logo on the front hood, back, and both sides. • An additional $2,000 is spent on a deluxe roof rack and a trailer hitch. The painting, roof rack, and hitch are all expected to increase the future benefits of the vehicle for Great Adventures. In addition, on October 22, 2025, the company pays $400 for basic vehicle maintenance related to changing the oil, replacing the windshield wipers, rotating the tires, and inserting a new air filter. 2. Record the expenditure related to vehicle maintenance on…

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