Current Attempt in ProgressYour answer is incorrect.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 itwould 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% taxrate. (Round simple payback period to 3 decimal places, e.g. 15.256 and IRR to 2 decimal places, e.g. 15.25%. Round intermediate calculationsto 2 decimal places, eg. 15.25.)Simple payback periodIRRyears%

Payback period is a financial metric used to determine how long it takes to recover the initial…

Answered: Ruth just graduated from college. Since…

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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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.
Seth Fitch owns a small retail ice cream parlor. He is considering expanding the business and has identified two attractive alternatives. One involves purchasing a machine that would enable Mr. Fitch to offer frozen yogurt to customers. The machine would cost $7,530 and has an expected useful life of three years with no salvage value. Additional annual cash revenues and cash operating expenses associated with selling yogurt are expected to be $6,070 and $850, respectively.Alternatively, Mr. Fitch could purchase for $9,960 the equipment necessary to serve cappuccino. That equipment has an expected useful life of four years and no salvage value. Additional annual cash revenues and cash operating expenses associated with selling cappuccino are expected to be $8,440 and $2,350, respectively.Income before taxes earned by the ice cream parlor is taxed at an effective rate of 20 percent.Required Determine the payback period and unadjusted rate of return (use average investment) for each…
Mary is considering opening a hobby and craft store. Mary plans to operate the business for six years. Mary requires a minimum 6% return on this investment. Ignore income taxes in this problem.) The data pertaining to her investment opportunity are: Cost of equipment $ 175,000 Working capital needed $ 185,000 Annual cash inflow from sales $ 190,000 Annual cash outflow for operating costs $ 145,000 Salvage value of equipment $ 20,000 Mary plans to operate the business for six years. Mary requires a minimum 6% return on this investment. What is the annual NET savings?
After a bad accident Anton receives a large sum in compensation. He is thinking about using it to invest in a stretch limousine to hire out for special occasions. The cost of the limousine is £100,000. Anton is due to retire in six years, at which stage he thinks he will be able to sell the limousine for £40,000. The net cash inflows for the venture, after allowing for the driver's wages and other direct expenses are: End of year Net cash flow (£) 1 10,000 2 15,000 3 20,000 4 20,000 5 20,000 6 15,000 (a) Find the payback period for this venture. (b) Calculate the net present value using a discount rate of 8%.
Please Explain the following thoroughly Include how to find the Book value and formula and how to to find the net cash flow with formula. Ronnie's Custom Cars purchased some fixed assets two years ago for $35,000. The assets areclassified as 5-year property for MACRS. Ronnie is considering selling these assets now sohe can buy some newer fixed assets which utilize the latest in technology. Ronnie has beenoffered $19,500 for his old assets. What is the net cash flow from the salvage value if the taxrate is 34 percent?
Need Help with the IRR with full working
How do I solve for the chart?
Seth Fitch owns a small retail ice cream parlor. He is considering expanding the business and has identified two attractive alternatives. One involves purchasing a machine that would enable Mr. Fitch to offer frozen yogurt to customers. The machine would cost $7,980 and has an expected useful life of three years with no salvage value. Additional annual cash revenues and cash operating expenses associated with selling yogurt are expected to be $6,010 and $840, respectively. Alternatively, Mr. Fitch could purchase for $9,960 the equipment necessary to serve cappuccino. That equipment has an expected useful life of four years and no salvage value. Additional annual cash revenues and cash operating expenses associated with selling cappuccino are expected to be $8,380 and $2,400, respectively. Income before taxes earned by the ice cream parlor is taxed at an effective rate of 20 percent. Required a. Determine the payback period and unadjusted rate of return (use average investment) for each…
Alia wants to open up a sandwich shop in Amman. She collects data on the initial cost, operating and maintenance cost, yearly benefit (revenue from sandwich sales), and salvage value of the equipment she buys for the sandwich shop when she closes down the business in 5 years. Determine the best alternative using the annual cash flow analysis method for an interest rate of 8%. Do nothing is a possible alternative. Alt B $45,000 $25,000 $10,000 $4,000 $18,000 $13,000 $3,000 $6,000 Alt A First Cost Benefit per yr O&M annua st Salvage Value Life in years 5 (35 Points) Alt C $20,000 $1,900 $9,000 $4,600 Alt A $45,000 $10,000 and $18,000 Alt B $25,000 $4,000 $13,000 Alt C $20,000 $1.900 $9,000 First Cost Benefit per year Operations maintenance cost Salvage Value Life in years $3,000 $6.000 $4,600
ary is considering opening a hobby and craft store. Mary plans to operate the business for six years. Mary requires a minimum 6% return on this investment. Ignore income taxes in this problem.) The data pertaining to her investment opportunity are: Cost of equipment $ 175,000 Working capital needed $ 185,000 Annual cash inflow from sales $ 190,000 Annual cash outflow for operating costs $ 145,000 Salvage value of equipment $ 20,000 Mary plans to operate the business for six years. Mary requires a minimum 6% return on this investment. What is the present value factor you will use for the net annual cash flows?
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.
Bowie is trying to determine the amount to set aside so that he will have enough money on hand in 3 years to overhaul the engine on his vintage used car. While there is some uncertainty about the cost of engine overhauls in 3 years, by conducting some research online, John has developed the following estimates. Engine Overhaul Estimated Cash Outflow $310 620 840 990 Probability Assessment 10% 30% 50% 10% Click here to view factor tables How much should John Bowie deposit today in an account earning 8%, compounded annually, so that he will have enough money on hand in 3 years to pay for the overhaul? (Round factor values to 5 decimal places, e.g. 1.25124 and final answer to decimal places, e.g. 458,581.) Deposit amount $____?

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