Velma and Keota (V&K) is a partnership that is considering two alternative investment opportunities. The first investment opportunitywill have a four-year useful life, will cost $8,747.24, and will generate expected cash inflows of $2,700 per year. The second investmentis expected to have a useful life of four years, will cost $8,449.76, and will generate expected cash inflows of $2,900 per year. Assumethat V&K has the funds available to accept only one of the opportunities. (PV of $1 and PVA of $1)Note: Use appropriate factor(s) from the tables provided.Requireda. Calculate the internal rate of return of each investment opportunity.Note: Do not round intermediate calculations.b. Based on the internal rates of return, which opportunity should V&K select?a. First investmenta. Second investmentb. V&K should select theInternal Rate of Return%%< Prev9 of 11Next >

IRR is also known as Internal Rate of Return.. It is a capital budgeting technique which helps in…

Answered: Velma and Keota (V&K) is a partnership…

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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A and B formed a Partnership on January 1, 2020. A contributed capital of P50,000, while B contributed capital of P30,000. The Partnership agreement provides for the following: o Capital accounts are to be credited annually with interest at 5% of the beginning capital. o Partner B is to be paid salary of P2,000 a month. o Partner B is to receive a bonus of 10% based on the net income. The Partnership's income statement for the year ended is as follows: Revenues P101,000 30,000 71,000 Expenses (including salary, interest, and bonus) Net income Determine the amount of bonus.
Maxwell and Smart are forming a partnership. Maxwell is investing a building that has a market value of $180,000. However, the building carries a $56,000 mortgage that will be assumed by the partnership. Smart is investing $120,000 cash. The balance of Maxwell's Capital account will be: Multiple Choice $180,000. $124,000. $56,000. $64,000. $60,000.
Jack and Tony are partners in a software engineering company. Jack and Tony have capital balances of $75,000 and $62,000 respectively. In 2020, the two partners made a profit of $240,000. How much should each receive from the profit in the absence of a partnership agreement? Jack will get…$ Tony will get…$
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es Watts and Lyon are forming a partnership. Watts invests $27,000 and Lyon invests $63,000. The partners agree that Watts will work one-fourth of the total time devoted to the partnership and Lyon will work three-fourths. They have discussed the following alternative plans for sharing income and loss: (a) in the ratio of their initial capital investments; (b) in proportion to the time devoted to the business; (c) a salary allowance of $18,000 per year to Lyon and the remaining balance in accordance with the ratio of their initial capital investments; or (d) a salary allowance of $18,000 per year to Lyon, 8% interest on their initial capital investments, and the remaining balance shared equally. The partners expect the business to perform as follows: Year 1, $18,000 net loss; Year 2, $45,000 net income; and Year 3, $75,000 net income. Required: Complete the tables, one for each of the first three years, by showing how to allocate partnership income or loss to the partners under each of…
Watts and Lyon are forming a partnership. Watts invests $40,500 and Lyon invests $49,500. The partners agree that Watts will work one-fourth of the total time devoted to the partnership and Lyon will work three-fourths. They have discussed the following alternative plans for sharing income and loss: (a) in the ratio of their initial capital investments; (b) in proportion to the time devoted to the business; (c) a salary allowance of $15,000 per year to Lyon and the remaining balance in accordance with the ratio of their initial capital investments; or (d) a salary allowance of $15,000 per year to Lyon, 11% interest on their initial capital investments, and the remaining balance shared equally. The partners expect the business to perform as follows: Year 1, $13,000 net loss; Year 2, $32,500 net income; and Year 3, $54,167 net income. Required: Complete the tables, one for each of the first three years, by showing how to allocate partnership income or loss to the partners under each of…
The partnership of Michelle, Amal, and Maureen has done well. The three partners have shared profits and losses in a 1:3 ratio, with capital balances of $60,000 each. Maureen wants to retire and withdraw. Prepare a schedule showing how the cost should be divided if Amal and Michelle decide to pay Maureen $70,000 for retirement of her capital account and the new agreement will share profits and losses 50:50.
Watts and Lyon are forming a partnership. Watts invests $24,500 and Lyon invests $45,500. The partners agree that Watts will work one-fourth of the total time devoted to the partnership and Lyon will work three-fourths. They have discussed the following alternative plans for sharing income and loss: (a) in the ratio of their initial capital investments; (b) in proportion to the time devoted to the business; (c) a salary allowance of $18,000 per year to Lyon and the remaining balance in accordance with the ratio of their initial capital investments; or (d) a salary allowance of $18,000 per year to Lyon, 9% interest on their initial capital investments, and the remaining balance shared equally. The partners expect the business to perform as follows: Year 1, $17,000 net loss; Year 2, $42,500 net income; and Year 3, $70,833 net income. Required: Complete the tables, one for each of the first three years, by showing how to allocate partnership income or loss to the partners under each of…
Jennifer DeVine and Stanley Farrin decide to organize the ALL-Star partnership. DeVine invests $25,000 cash, and Farrin contributes $20,000 cash and equipment having a book value of $5,500. Prepare the entry to record Farrin’s and DeVine’s investment in the partnership, assuming the Ferrin’s equipment has a fair market value of $9,000
Shawna Kearn and Todd White are forming a partnership to develop a theme park near Bay City, Florida. Kearn contributes cash of $1,000,000 and land with a current market value of $13,500,000. When Kearn purchased the land in 2013, its cost was $7,500,000. The partnership will assume Kearn's $3,000,000 note payable on the land. White contributes cash of $3,000,000 and equipment with a current market value of Requirements 1. Journalize the partnership's receipt of assets and liabilities from Kearn and from White. 2. Compute the partnership's total assets, total liabilities, and total partners' equity immediately after organizing.
Red, White and Blue form a partnership on May 1, 2020. They agree that Red will contribute office equipment with a total fair value of P 40, 000; White will contribute delivery equipment with a fair value of P 80, 000; and Blue will contribute cash. If Blue want a one- third interest in the capital and profits, how much total partnership capital would be? * •60, 000 O :40, 000 O : 180, 000 O :120, 000

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