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 perlod to 3 decimal places, eg. 15.256 and IRR to 2 decimal places, eg. 15.25%. Round Intermediate calculationsto 2 decimal places, eg. 15.25)Simple payback periodIRRyears.%

A financial indicator called payback period is used to estimate how long it will take an investment…

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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12. Marlon can purchase a company car for his real estate business for $30 000. Interest lost on the money used for the purchase is estimated at 6% per year, compounded quarterly. Alternatively, Marlon can lease the car for $4000 per year. a) Calculate the cost of keeping the car for five years, and then selling it for $12 000. Include the cost of lost interest on the money used for the purchase. b) Calculate the cost of leasing the car for five years. c) Which plan is a better deal for Marlon? How much more would he pay with the other plan?
The owner of a pizza restaurant needs to buy a new pizza oven for the restaurant. The oven costs $450, is expected to last 5 years, and will be depreciated using the straight line method. If the total cash inflows from the new oven are constant at $750 for the next 5 years, and the total cash outflows are constant at $380 for the next 5 years, determine the cash flow for the pizza restaurant in the second year assuming the tax rate is 34%. $ Place your answer in dollars and cents.
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Linda just graduated from college. Since she is starting her own business, it’s time to upgrade from her clunker to a reliable vehicle. Linda has the option to purchase a new car for her business at a cost of $31,416 (life of 7 years with no salvage value), estimating that it would help her bring in additional annual net operating cash flows of $7,700 over the life of the car.Determine the simple payback period and the IRR for this investment. Linda expects her business income to be subject to a 30% tax rate. (Round simple payback period to 3 decimal places, e.g. 15.256 and IRR to 2 decimal places, e.g. 15.25%. Round intermediate calculations to 2 decimal places, e.g. 15.25.) Simple payback period enter a number of years rounded to 3 decimal places years IRR enter percentages rounded to 2 decimal places %
Anthony operates a part time auto repair service. He estimates that a new diagnostic computer system will result in increased cash inflows of $1,500 in Year 1, $2,100 in Year 2, and $3,200 in Year 3. If Anthony's required rate of return is 10%, then the most he would be willing to pay for the new diagnostic computer system would be (Ignore income taxes.): Click here to view Exhibit 13B-1 and Exhibit 13B-2, to determine the appropriate discount factor(s) using the tables provided. Multiple Choice $4,599 $5,501 $5,638
Mr. Gallagher is considering replacing his five-year-old car with a new one. The new car will cost $30,000, taking into consideration the trade-in value of the old car. The new car will save Mr. Gallagher $5,000 per year in terms of gasoline, repairs, and maintenance. Mr. Gallagher plans to keep this new car for five years. At the end of five years, the car can be sold for $8,000. What is the internal rate of return on the new car? Select one: a. 1.40% b. 2.80% c. 5.00% d. 8.14% e. 9.43%
Subject: accounting
3. Your favorite neighbor Poindexter learns you are pursuing an MBA and seeks your advice on how to finance his next vehicle. He has gathered information about each option but is not sure how to compare the alternatives. Purchasing a new vehicle will cost $26,500, and he expects to spend about $500 per year in maintenance costs. He would keep the vehicle for five years and estimates that the salvage value will be $10,500. Alternatively, Poindexter could lease the same vehicle for five years at a cost of $5,000 per year, including all maintenance. The lease payments are made at the beginning of each year. Assume a discount rate of 10%. o Provide an analysis for Poindexter at 10%. o Provide the same analysis for good old Poindexter assuming a rate of 5%. At what rate will he be indifferent? o
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Following the last question - John is evaluating the idea to open an ice cream shop on a piece of land. The followings are what he might include in the cash flows: Instead, John can earn $120,000 if he decides to sell the land today. He bought this land for $350,000 two years ago. • Outfitting the space for an ice cream shop would require a capital expenditure of $150,000 today. It'll require an investment of $30,000 in inventories for making the ice creams today. What are the opportunity costs of opening the ice cream shop? 1 · . -$120,000 O-$180,000 O-$350,000 O-$270,000 4
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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.

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