McDonald's major distribution partner, The Martin-Brower Company, needs at least $1 million to build a new warehouse in Medicine Hat 2 years from today. To date, it has invested $500,000.00. If it continues to invest $46,000.00 at the end of every quarter into a fund earning 6% quarterly, will it have enough money to build the warehouse 2 years from now? How much money will it have? The Martin-Brower Company's $500,000.00 will have grown to and its $46,000.00 deposits will have grown Thus, it ? ✓ have enough money 2 years from now. to for a total of

McDonald's major distribution partner, The Martin-Brower Company, needs at least $1 million to build a new warehouse in Medicine Hat 2 years from today. To date, it has invested $500,000.00. If it continues to invest $46,000.00 at the end of every quarter into a fund earning 6% quarterly, will it have enough money to build the warehouse 2 years from now? How much money will it have? The Martin-Brower Company's $500,000.00 will have grown to and its $46,000.00 deposits will have grown Thus, it ? ✓ have enough money 2 years from now. to for a total 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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Similar questions

One year ago, the Jenkins Family Fun Center deposited $3,400 into an investment account for the purpose of buying new equipment four years from today. Today, they are adding another $5,200 to this account. They plan on making a final deposit of $7,400 to the account next year. How much will be available when they are ready to buy the equipment, assuming they earn a rate of return of 6 percent? Multiple Choice $18,516.29 $19,019.26 $19,431.85 $19,928.37 $17,421.48
1. A consulting firm is considering the purchase of a new computer system for their enterprise management needs. A vendor has quoted a purchase price of $240,000. The consulting firm plans to borrow one-fourth of the purchase price from a bank at 8% compounded annually. The loan is to be repaid in equal annual payments over a six year period. The remainder of the purchase price is available through other funding sources (e.g. not a loan or money that must be repaid). The time. computer system is expected to last eight years and has a salvage value of $8,000 at that During the 8-year period, the consultant firm also expects to pay a technician $25,000 per year to maintain the system but will also save an estimated $55,000 per year through increased efficiencies in operations. The consulting firm project manager has determined that a MARR of 12%/year should be used to evaluate this investment project. What is the external rate of return for the investment project? Should the new computer…
You need to prepare for three large, upcoming project expenditures which will begin 3 years from now. The first required cash flow will be $56,000, the next year will require $94,000, and then $132,000. If you begin setting aside funds from your current budget next month, how much do you need to save each month in order to have enough to cover all three cash flows the day the first cash flow comes due? Assume you can invest these funds at 8.4 percent APR, compounded monthly. Please demonstrate how to calculate using a financial calculator, when possible.
The owners of a chain of fast-food restaurants spend $29 million installing donut makers in all their restaurants. This is expected to increase cash flows by $10 million per year for the next five years. If the discount rate is 6.2% were the owners correct in making the decision to install donut makers? O Yes, as it has a net present value (NPV) of $13 million. O No, as it has a net present value (NPV) of -$1 million. O No, as it has a net present value (NPV) of -$3 million. QYes, as it has a net present value (NPV) of $8 million.
Two years ago, Lou Marshall, Inc. deposited $18,125 in an investment account for the purpose of buying new equipment four years from today. Last year, it added another $20,212 to this account. The company plans on making a final deposit of $17,503 to the account today. How much will be available when it is ready to buy the equipment, assuming the company earns 13.27% APR on its invested funds? Choose the closest amount. $118,681.22 $92,502.23 $91,918.47 $104,777.28 $72,097.87
A small business has determined that the machinery they currently use will wear out in 17 years. To replace the new machine when it wears out, the company wants to establish a savings account today. If the interest rate on the account is 1.1 percent per quarter and the cost of the machinery will be $255,000, how much will the company have to deposit today?
Pinder Co., Ltd. is considering investing $500, 000 to build a factory to produce electric bicycles. Pinder Co., Ltd. has signed a contract with a large retailer that guarantees that Pinder Co., Ltd. will get $50 for every bicycle sold, in addition to all production - related costs. This means that the annual cash flow generated by the production of bicycles will be $50 multiplied by the number of bicycles sold. In exchange for this guarantee, the retailer will take over the factory at a price of $200, 000 in five years. Pinder Co., Ltd. is expected to sell 7, 000 bicycles every year in the next five years. Assume that the discount rate of Pinder Co., Ltd. is 10%. How much do the sales of bicycles need to be reduced before this project reduces the wealth of the shareholders of Pinder Co., Ltd. ?
Consider a project to supply 102 million postage stamps per year to the U.S. Postal Service for the next five years. You have an idle parcel of land available that cost $1,715,000 five years ago; if the land were sold today, it would net you $1,790,000 aftertax. The land can be sold for $1,750,000 after taxes in five years. You will need to install $5.45 million in new manufacturing plant and equipment to actually produce the stamps; this plant and equipment will be depreciated straight-line to zero over the project's five-year life. The equipment can be sold for $655,000 at the end of the project. You will also need $585,000 in initial net working capital for the project, and an additional investment of $52,000 in every year thereafter. Your production costs are .50 cents per stamp, and you have fixed costs of $1,070,000 per year. If your tax rate is 23 percent and your required return on this project is 8 percent, what bid price should you submit on the contract? Note: Do not round…
The owners of a chain of fast-food restaurants spend $25 million installing donut makers in all their restaurants. This is expected to increase cash flows by $9 million per year for the next five years. the discount rate is 6.2%, were the owners correct in making the decision to install donut makers? OA. Yes, as it has a net present value (NPV) of $8 million. O B. Yes, as it has a net present value (NPV) of $13 million. OC. No, as it has a net present value (NPV) of - $3 million. OD. No, as it has a net present value (NPV) of $1 million. C
We are funding an organization for ten years. The first payment will be made one year from today (end of year one) and will be $8,350. Each year after that, the organization will receive payment from us annually. The payment will increase at a rate of 2% per year after the second payment. If the annual interest rate is 15%, what is the present value of this endowment?
First National Bank of Conway is considering installing two ATMs in its Southside branch. The new machines are expected to cost $37000 apiece. Installation costs will amount to about $15000 per machine. Each machine has a projected useful life of 10 years. Due to rapid growth in the Southside district, these two machines (combined) are expected to handle 50000 cash transactions per year. On average, each cash transaction is expected to save $0.30 in teller expenses. If First National has a 0.10 cost of capital, what is the NPV of this project?
You are the vice president of finance for a manufacturer of scuba diving gear. The company is planning a major plant expansion in 5 years. You have decided to start a sinking fund to accumulate the funds necessary for the project. Your company's investments yield 12% compounded quarterly. It is estimated that $4,000,000 in today's dollars will be required; however, the inflation rate on construction costs and plant equipment is expected to average 6% per year for the next 5 years. (a) Use the compound interest concept from Chapter 11 to determine how much (in $) will be required for the project, taking inflation into account. $ (b) What sinking fund payments (in $) will be required at the end of every 3-month period to accumulate the necessary funds? $

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