3. An electric utility is taking bids on the purchase, installation, and operation of HTtowers. The following table has some details associated with the two bids that werereceived.a. Which is the most economical bid if the interest rate is considered to be 11%?Neither tower will have any salvage value after 20 years of use. (10)Cost per TowerBid ABid BEquipment cost$112,000$98,000Installation cost$25,000$30,000Annual maintenance$2,000$2,500and inspection feeAnnual extra income$800taxesLife40 years35 yearsSalvage value$0$0

Given as, A Equipment Cost = 112,000 Installation Cost = 25,000 Annual Maintenance Cost = 2000…

Answered: nomical bid if the interest rate is co…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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An investor is considering purchasing a sale-leaseback with the following 10-year cash flows: ΕΟΥΙ Cash Flows + 0 1 $350,000 2 $357,000 3 $364,140 4 $371,423 5 $378,851 6 $386,428 7 $394,157 8 $402,040 9 $410,081 10 $418,282 + Sale Proceeds $5,333,000 If the seller/lessee in the previous question insists on a purchase price of $5,000,000 today, what would the investor's yield be? 9.56 percent 7.66 percent 8.22 percent 8.03 percent
4. Assume that the call option of the asset stated below has a strike price of $100 expires in 4 months from now with one-period risk free of 5%. Compute for the call option price. ASSET PRICEG $135H $80
The interest rate is 8%. If all the alternatives have a 12-year useful life and no salvage value, which alternative should be selected?
H4. Work out the value of European Call on a risky asset A, currently selling at $600. The European Call has a term to maturity of 1.5 years and a strike price of $675. SD(dA/A), the volatility of returns on the risky asset is 18% per year, and the discrete risk-free rate is 0.9% per year
None
Assuming the leasehold yield is 2% above the freehold yield, calculate the Years Purchase (YP) dual rate for 10 years if the accumulative rate is 3% and that a comparable freehold property let at full market rent of $40,000 has just been sold for $500,000. Hint: Analyse the market yield from the comparable first and then use it to calculate the required YP. 4.3872 7.3625 6.1250 5.3410
(B). An investor must choose between two options. The first option (A) offers AED 10m for AED 2m a year for 5 years. The second option (B) offers AED 11m of AED 1m a year for four years and AED 7m in year 5. (a). Compare the present value of each option by assuming a range of the required rate of return of the investor, say 8%, 9%, 10%, 11%, and 12%. What is your advice?
12. A chooser option expires in 6 months, but the owner must make the choice in 4 months. The strike price is $27 and the underlying asset is currently worth $25.88. A call option that expires in 6 months (same underlying asset, strike price = $27) has a premium of $4.63 and an identical put has a premium of $4.99. An otherwise identical call that expires in 4 months costs $3.69 and its put option counterpart costs $4.30. What should be the premium for this chooser option?
1
I need typed answer with explanation N
4
Seroja Berhad (Seroja) wishes to evaluate the following two alternatives available to acquire a machine: Lease Alternative Seroja can lease the machine under a 5-year lease requiring lease payment of RM5,000 at the beginning of each year. All maintenance costs will be borne by the lessor and the insurance and other costs will be borne by the lessee. “Borrowing to Buy” Alternative The machine costs RM20,000 and will have a 5-year life. The purchase will be financed by a 5year, 15% interest. Seroja will pay RM1,000 per year for a service contract that covers insurance and other costs. Seroja Berhad plans to keep the machine and use it beyond its 5-year life. The machine will be depreciated as given below: Year Depreciation RM 1 5,000 2 4,000 3 3,000 4 2,000 5 1,000 Given that the corporate tax rate is 30%. Prepare the Cash Flows Analysis by clearly showing the Net Advantage of Leasing (NAL).…

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nomical bid if the interest rate is co e any salvage value after 20 years ost no Towor