Problem 1 Jim is planning to invest between $12,000 and $15,000 in two types of investment: investment 1 yields 6% and investment 2 yields 8%. Because of tax laws, he should invest between 40% and 60% of his total investment in investment 1 and no more than $8, 100 in investment 2. How much should he invest and how should that amount be allocated to the two investments? c) In this document, solve the problem graphically and explain the optimal allocation of investment fund to the two investments.

Problem 1 Jim is planning to invest between $12,000 and $15,000 in two types of investment: investment 1 yields 6% and investment 2 yields 8%. Because of tax laws, he should invest between 40% and 60% of his total investment in investment 1 and no more than $8, 100 in investment 2. How much should he invest and how should that amount be allocated to the two investments? c) In this document, solve the problem graphically and explain the optimal allocation of investment fund to the two investments.

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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For the following two projects, which statement is correct. Year 0 1 2 Playhouse -30 16 23 Fort -80 45 48 O choose Fort when the cost of capital is 4% O choose Fort because its IRR is higher choose Fort when the cost of capital is 6% O choose Playhouse because its IRR is higher
Need answers for 2 and 3
Star City is considering an investment in the community center that is expected to return the following cash flows: Use Exhibit A.8. Year Net Cash Flow 1234in 5 $ 28,000 58,000 88,000 88,000 108,000 This schedule includes all cash inflows from the project, which will also require an immediate $208,000 cash outlay. The city is tax-exempt; therefore, taxes need not be considered. Required: a. What is the net present value of the project if the appropriate discount rate is 22 percent? (Round PV factor to 3 decimal places. Negative amount should be indicated by a minus sign.) Net present value
1. You may use Excel to answer this question. Explain completely which investment you would invest in today given the following information: Year 0 1 2 3 4 5 6 Investment 1 Revenues Discount rate 4.5% 0 2,000 4,000 6,000 8,000 6,000 4,000 Costs 3,000 2,000 1,000 Year 1,000 500 0 1 2 1,000 3 1,000 4 5 6 Investment 2 Revenues Discount rate 3.5% 0 0 3,000 6,500 9,000 13,000 15,000 Costs 8,000 6,000 3,000 3,000 2,000 1,000 0 Assume the firm wants to maximize profits where: Profits = Revenue - Costs Please show work using the time value of money formula.
Company X is considering two investment options. Both options require an investment-$400,000. Option 1: Expected rate of return - 12.0%, tax rate - 20.0 % Option 2: Expected rate of return - 9.0%, tax rate - 25.0% Compute the DIFFERENCE in before tax income between the two options O Option 1 exceeds Option 2 by $14,000 O Option 1 exceeds Option 2 by $12,000 None of the other answers are correct exceeds Option 2 by $10,000 O Option 1 O Option 2 exceeds Option 1 by $10,000
You run a construction firm. You have just won a contract to build a government office complex. Building it will require an investment of $10.1010.10 million today and $5.105.10 million in one year. The government will pay you $21.2021.20 million in one year upon the building's completion. Suppose the interest rate is 10.2 % 10.2 %. a. What is the NPV of this opportunity? b. How can your firm turn this NPV into cash today?
Please provide step by step solution for both the questions.
I really need help on solving this correctly since I'm not understanding the problem Please help! Thank you. UCFAT is a level perpetuity. Firm Value= $ 100m Present value of tax benefits=20 million. Amount of debt= unknown. Interest rate on debt=10% Unlevered cost of Equity = 20% Depreciation= $ 1 million per year. New Equipment= 1 million per year. UCFAT is unlevered cash flow after tax Question content area bottom: Part 1 Use 99 if the answer is indeterminate a) WACC of the firm is? % (Round to two decimals) b) Tax Rate is ? % (Round to two decimals)
Please help me with part D. Thank you so much
Use the information provided to answer the questions.Use the information provided below to calculate the following. Where applicable, use the presentvalue tables provided in APPENDICES 1 and 2 that appear after QUESTION 5. QUESTION) Calculate the Accounting Rate of Return (on average investment) of Project B (expressed to twodecimal places). INFORMATION Zeda Enterprises has the option to invest in machinery in projects A and B but finance is only available to invest inone of them. You are given the following projected data:Project A Project BInitial cost R300 000 R300 000Scrap value R40 000 0Depreciation per year R52 000 R60 000Net profitYear 1 R20 000Year 2 R30 000Year 3 R50 000Year 4 R60 000Year 5 R10 000Net cash flowsYear 1 R90 000Year 2 R90 000Year 3 R90 000Year 4 R90 000Year 5 R90 000 Additional informationThe discount rate used by the company is 12%. Transcribed Image Text:Number of Periods 1 2 3 4 5 6 7 8 m 10 11 12 13 14 15 1% 2% 0.9901 0.9804 0.9709 3% 3.9020 3.8077…
Determine the following: 1. Determine the initial investment required by the press. 2. Determine the annual after tax cash inflows attributable to the press from year 1 to 4 3. Determine the after tax cash flow on year 5. 4. ASSUMING the project’s IRR is 25%, the discount rate should be above 25% for the project to have a PW higher than zero (true or false) 5. Assuming that at the very last minute, you are able to sell the equipment for 200,000 (without altering the book value). What is the cash flow on year 5? PROBLEM: Wells Printing is considering expanding its business by purchasing a printing press. The cost of the press is $2 million. Installation costs amount to $200,000. As a result of acquisition of the press, sales in each of the next 5 years are expected to be $1.6 million from this new line of business, but product costs (excluding depreciation) will represent 50% of sales. The press will not affect the firm’s net working capital requirements. The press will be depreciated…
pm.3 answer must be in proper format or i will give down vote

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