ASSET ALLOCATION Ashley has earmarked at most
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Finite Mathematics for the Managerial, Life, and Social Sciences, 11th Edition
- Nanaimo Inn has 60 rooms and expects occupancy to be 70%. The owner wants to earn 10% return on total assets after tax. Total assets: $2,400,000 Income tax rate: 25% Depreciation: straight line (20 years) on assets of $1,600,000 (no salvage) $300,000 Other fixed expenses: Direct costs: $100,000 $200,000 10% on balance owing of $900,000 Annual principal payment Indirect costs Mortgage interest: Mortgage principal: required: $45,000 Room service has an operating loss of $50,000 Calculate the average required room rate using the above information. If the differential between single and double rooms is $12 per night and 35% of the rooms sold are doubles, calculate the single and double room rates.arrow_forwardplease provide a clear solutionarrow_forwardAssume the following information for a capital budgeting proposal with a five-year time horizon: Initial investment: Cost of equipment (zero salvage value) $ 570,000 Annual revenues and costs: Sales revenues $ 300,000 Variable expenses $ 130,000 $ 50,000 Depreciation expense Fixed out-of-pocket costs $ 40,000 Click here to view Exhibit 12B-1 and Exhibit 12B-2, to determine the appropriate discount factor(s) using the tables provided. If the company's discount rate is 12%, then the net present value for this investment is closest to: Multiple Choice $281,600. $(181,600). $(281,600). $(101,350).arrow_forward
- turner video will invest $76,344 in a project. The firm's cost of capital is 10 percent. The investment will provide the following inflows: Year 1: Cash Flow $15,000 Year 2: Cash Flow $17,000 Year 3: Cash Flow $21,000 Year 4: Cash Flow $25,000 Year 5: Cash Flow $29,000 The internal rate of return is 11 percent. a. If the reinvestment assumption of the net present value method is used, what will be the total value of the inflows after five years? (assume the inflows come at the end of each year) b. if the reinvestment assumption of the internal rate of return method is used, what will be the total value of the inflows after five years? c. generally, is one investment assumption likely to be better than another?arrow_forwardISEM Power is considering the acquisition a local Waste-to-Energy plant which produces electricity for the energy market by burning wastes collected from the community. The investment will cost the company an initial cost of $32 million which will be funded by taking a 5-year bank loan at an interest rate of 10% per year. The loan will be repaid with 5 equal end-of-year payments. Annual profits from the sales of electricity generated by the plant to the power grid are estimated to be $4 million in year 1 to year 10, and $6 million in year 11 to year 20. All cash flows are assumed to occur at the end of each year. The plant has a useful life of 20 years with a salvage value of $1 million. The company MARR is 12%. qns: What is the MIRR of the project if the financing rate is 10% and the reinvestment rate is 12%?arrow_forwardSuppose that at the beginning of 2004 you invested $8,500 in the Stivers mutual fund and $5,000 in the Trippi mutual fund. The value of each investment at the end of each subsequent year is provided in the table below: Year Stivers Trippi 1 $11,000 $5,600 2 $12,000 $6,300 3 $13,000 $6,900 4 $14,000 $7,600 5 $15,000 $8,500 6 $16,500 $9,200 7 $17,500 $9,900 8 $19,000 $10,600 Which of the two mutual funds performed better over this time period?arrow_forward
- Consider each of the after-tax cash flows shown in the table below. Suppose that projects B and C are mutually exclusive. Suppose also that the required service period is eight years and that the company is considering leasing comparable equipment with an annual lease expense of $3,000, payable at the end of each year for the remaining years of the required service period. Which project is a better choice at 15%? Click the icon to view the cash flows for the projects. Click the icon to view the interest factors for discrete compounding when i=15% per year. The present worth of project B is $thousand. (Round to one decimal place.) More Info Capital Single Payment Compound Amount Factor (F/P, i, N) Equal Payment Series Sinking Present Fund Worth Factor Factor (A/F, i, N) Compound Amount Factor (F/A, i, N) 1.0000 More Info Recovery Factor (A/P, i, N) 1.1500 (P/A, i, N) 1.1500 1.0000 0.8696 1.3225 2.1500 0.4651 1.6257 0.6151 B с 1.5209 3.4725 0.2880 2.2832 0.4380 - $7,000 -$5,000 1.7490…arrow_forwardDirection: If the problem is silent about the overtime premium use the minimum 25%. Half human, half zombie for president manufacturing corp. A newly established business had the following transaction for the 1st month of its operation: A. Purchase of raw materials on account amounting to P650,000 B. Details for computation of payroll for the month are as follows: DIRECT LABOR INDIRECTLABOR SELLING AND ADMINPERSONNEL NUMBER OF EMPLOYEES 30 6 12 RATE PER DAY P600 P800 P500 TOTAL NUMBER OF REGULAR HOURSWORKED 5,280 1,056 2,112 TOTAL NUMBER OF OVERTIME 125 10 0 TAX WITHHELD P0.00 P0.00 P0.00 MANDATORY CONTRIBUTIONS - EMPLOYEE P23,600 P5,320 P9,600 MANDATORY CONTRIBUTIONS -EMPLOYER P43,820 P9,880 P17,820 C. 60% of overtime work is because of rush jobs d. Factory overhead is applied at 80% of direct labor e. Only 90% of raw materials available for use was issued to production (25% indirect materials) f. 20% of total manufacturing cost was still in the work in…arrow_forwardTempura, Inc., is considering two projects. Project A requires an investment of $54,000. Estimated annual receipts for 20 years are $23,000; estimated annual costs are $12,500. An alternative project, B, requires an investment of $77,000, has annual receipts for 20 years of $31,000, and has annual costs of $18,000. Assume both projects have a zero salvage value and that MARR is 9.5%/year. Click here to access the TVM Factor Table Calculator Part a Your answer is incorrect. What is the present worth of each project? Project A: $ Project B: $ Carry all interim calculations to 5 decimal places and then round your final answer to the nearest dollar. The tolerance is ±20.arrow_forward
- (Net present value calculation) Carson Trucking is considering whether to expand its regional service center in Mohab, UT. The expansion requires the expenditure of $9,000,000 on new service equipment and would generate annual net cash inflows from reduced costs of operations equal to $2,000,000 per year for each of the next 9 years. In year 9 the firm will also get back a cash flow equal to the salvage value of the equipment, which is valued at $0.8 million. Thus, in year 9 the investment cash inflow totals $2,800,000. Calculate the project's NPV using a discount rate of 6 percent. If the discount rate is 6 percent, then the project's NPV is $. (Round to the nearest dollar.) Carrow_forwardWells Fargo is considering making a $50 million loan to Boeing. The annual interest rate on this loan is 10%. Boeing is supposed to pay interest at the end of year 1, and interest plus principal at the end of year 2. The survival rate is 92% per year and the recovery rate is 50%. The Credit Default Swap spread is 4%. If Wells Fargo decides to make the loan, it will also purchase a CDS to hedge the credit risk. In year 1, the expected cash flow to Wells Fargo is 2.76 if the loan does not default and the expected cash flow is 4.4 if the loan defaults. The probability for this loan to default in year 2 is 0.0736arrow_forwardMary establishes an investment portfolio that pays £5000 at the end of every year in perpetuity.This income is split between three beneficiaries.The first beneficiary ,Ann,will receive the income for the first 15 years,while the second beneficiary,Bob,will receive the income for the following 15 years.After 30 years,the portfolio will be donated to a charity.Assuming a 5%p.a. Effective rate of interest ,what is the present value of the shares of each beneficiary?arrow_forward
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