Problem 1 MaBak Inc. is considering buying a robotic assembly machine that will bring in an extra $28,000 per year in profit (after deducting costs for electricity, maintenance, etc.). The machine will last for 8 years; however, it will not have any resale value. MaBak Inc. has not priced robotic machines. Calculate the maximum price MaBak Inc. should pay if they want to earn an 10% return on any money invested in the company. Which table will you use for the above calculation? Number of periods? Interest Rate? Factor? What is the maximum price?
Problem 1 MaBak Inc. is considering buying a robotic assembly machine that will bring in an extra $28,000 per year in profit (after deducting costs for electricity, maintenance, etc.). The machine will last for 8 years; however, it will not have any resale value. MaBak Inc. has not priced robotic machines. Calculate the maximum price MaBak Inc. should pay if they want to earn an 10% return on any money invested in the company. Which table will you use for the above calculation? Number of periods? Interest Rate? Factor? What is the maximum price?
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
Related questions
Question
Transcribed Image Text:Present Value of $1
n/i
3.0%
1
0.97087
2
0.94260
3 0.91514
4
0.88849
5
0.86261
6
0.83748
7 0.81309
8
0.78941
0.76642
0.74409
0.55368
0.41199
10
20
30
Present Value of An Ordinary Annuity
n/i
5.0%
6.0%
8.0%
3.0%
0.97087
4.0%
0.96154
1
0.95238
0.94340
0.92593
2
1.91347
1.88609
1.85941
1.83339
1.78326
3
2.77509
2.72325
2.67301 2.57710 2.48685
4
3.62990
3.54595
3.46511 3.31213 3.16987
5 4.57971
4.45182
4.32948
3.79079
4.21236 3.99271
5.07569 4.91732 4.62288
6
5.41719
5.24214
4.35526
7
6.23028
6.00205
5.78637 5.58238
5.20637
4.86842
8
7.01969
6.73274
6.46321
6.20979
5.74664
5.33493
9
7.78611
7.43533
7,10782
6.80169 6.24689 5.75902
10
8.53020
8.11090
7.72173
7.36009 6.71008 6.14457
11.46992 9.81815 8.51356
20
14.87747 3.59033
12.46221
30 19.60044 17.29203 15.37245 13.76483 11.25778 9.42691
2.82861
3.71710
4.0%
5.0%
6.0%
8.0%
10.0%
12.0%
0.94340
0.90909
0.89286
0.96154 0.95238
0.92593
0.92456 0.90703 0.89000 0.85734
0.82645 0.79719
0.88900
0.83962 0.79383
0.75131 0.71178
0.86384
0.82270
0.85480
0.79209 0.73503
0.68301 0.63552
0.82193 0.78353
0.74726 0.68058 0.62092 0.56743
0.50663
0.79031
0.74622
0.70496
0.63017 0.56447
0.58349 0.51316 0.45235
0.75992
0.71068
0.66506
0.73069
0.67684
0.62741 0.54027 0.46651 0.40388
0.70259
0.64461
0.50025 0.42410
0.36061
0.59190
0.55839 0.46319 0.38554
0.67556
0.61391
0.32197
0.45639 0.37689
0.31180 0.21455 0.14864 0.10367
0.30832
0.23138
0.17411 0.09938
0.05731 0.03338
Interest Rate?
Factor?
1:32²
10.0%
0.90909
1.73554
What is the maximum price?
Not Post
Problem 1
MaBak Inc. is considering buying a robotic assembly machine that will bring in an extra $28,000 per year in
profit (after deducting costs for electricity, maintenance, etc.). The machine will last for 8 years; however, it
will not have any resale value. MaBak Inc. has not priced robotic machines. Calculate the maximum price
MaBak Inc. should pay if they want to earn an 10% return on any money invested in the company.
Which table will you use for the above calculation?
Number of periods?
12.0%
0.89286
1.69005
2.40183
3.03735
3.60478
4.11141
4.56376
4.96764
5.32825
5.65022
7.46944
8.05518
Transcribed Image Text:Chapter 11- Time Value of Money and Bond Pricing
Problem 2
In 4 years, you plan to buy a new car and will need a down payment. How much would you need to invest
today in order to have $8,000 in 4 years? Assume interest rates are 4%.
Which table will you use for the above calculation?
Number of periods?
Interest Rate?
Factor?
What is the amount of investment?
Problem 3
MaBak Inc. issued $200,000 of 5 year, 12% bonds at an annual effective interest rate of 10%. Interest
payable semiannually. Calculate the total proceeds on the Bond Issue and the discount or premium that
would be booked.
What is the amount of the semi-annual interest
payment?
Will the bonds be issued at a discount or premium?
Interest Rate
Number of Periods
Factor
Interest Rate
Present Value of the Interest Payments
Number of Periods
SOPPE
Present Value of the Semiannual Interest Payment
Factor
natal
Present Value of the Face
Present Value of the Bond Face Amount
Bonds Proceeds (the answer is not $200,000)
Amount of Discount or Premium
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 3 steps with 2 images
Recommended textbooks for you
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
Foundations Of Finance
Finance
ISBN:
9780134897264
Author:
KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher:
Pearson,
Fundamentals of Financial Management (MindTap Cou…
Finance
ISBN:
9781337395250
Author:
Eugene F. Brigham, Joel F. Houston
Publisher:
Cengage Learning
Corporate Finance (The Mcgraw-hill/Irwin Series i…
Finance
ISBN:
9780077861759
Author:
Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor
Publisher:
McGraw-Hill Education