Corporate Finance
3rd Edition
ISBN: 9780132992473
Author: Jonathan Berk, Peter DeMarzo
Publisher: Prentice Hall
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Chapter 4, Problem 16P
Summary Introduction
To determine: Whether the buddy of Person X must invest the money for construction.
Introduction:
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Your friend in mechanical engineering has invented a money machine. The main drawback of the machine is that it is slow. It takes one year to manufacture $800. However, once built, the machine will last forever
and will require no maintenance. The machine can be built immediately, but it will cost $8,000 to build. Your friend wants to know if he should invest the money to construct it. If the interest rate is 4.0% per year,
what should your friend do?
The NPV of the machine is $
What should your friend do?
(Round to the nearest cent.)
(Select the best choice below.)
O A. Accept the machine because the NPV is equal to or greater than $0.
O B.
Reject the machine because the NPV is less than $0.
O C.
Reject the machine because the NPV is equal to or greater than $0.
O D. Accept the machine because the NPV is equal to or less than $0.
..
Your friend in mechanical engineering has invented a money machine. The main drawback of the machine is that it is slow. It takes one year to manufacture
$700.
However, once built, the machine will last forever and will require no maintenance. The machine can be built immediately, but it will cost
$7,000
to build. Your friend wants to know if he should invest the money to construct it. If the interest rate is
13.0%
per year, what should your friend do?
Question content area bottom
Part 1
The NPV of the machine is
$enter your response here.
(Round to the nearest cent.)
Part 2
What should your friend do? (Select the best choice below.)
A.
Accept the machine because the NPV is equal to or less than $0.
B.
Reject the machine because the NPV is equal to or greater than $0.
C.Reject the machine because the NPV is less than $ 0.
Reject the machine because the NPV is less than $0.
D.Accept the machine because…
Kevin learns that the game he has long awaited will be released in two years. He is not sure that his computer will be able to handle this game, so he decides to buy a new one. He estimates that the cost of the computer will be $3200. If he wants to have enough money to buy it by the time the game is released, how much should he invest into an account with an APR of 4.5% compounded monthly? Round your answer to the nearest cent.
Chapter 4 Solutions
Corporate Finance
Ch. 4.1 - Prob. 1CCCh. 4.1 - Prob. 2CCCh. 4.2 - Prob. 1CCCh. 4.2 - Prob. 2CCCh. 4.2 - Prob. 3CCCh. 4.3 - Prob. 1CCCh. 4.3 - Prob. 2CCCh. 4.4 - Prob. 1CCCh. 4.4 - What benefit does a firm receive when it accepts a...Ch. 4.5 - How do you calculate the present value of a a....
Ch. 4.5 - How are the formulas for the present value of a...Ch. 4.6 - Prob. 1CCCh. 4.6 - Prob. 2CCCh. 4.7 - Prob. 1CCCh. 4.7 - Prob. 2CCCh. 4.8 - Prob. 1CCCh. 4.8 - Prob. 2CCCh. 4.9 - Prob. 1CCCh. 4.9 - Prob. 2CCCh. 4.A - Your grandmother bought an annuity from Rock Solid...Ch. 4.A - Prob. A.2PCh. 4 - You have just taken out a five-year loan from a...Ch. 4 - Prob. 2PCh. 4 - Calculate the future value of 2000 in a. Five...Ch. 4 - Prob. 4PCh. 4 - Your brother has offered to give you either 5000...Ch. 4 - Prob. 6PCh. 4 - Prob. 7PCh. 4 - Your daughters currently eight years old. You...Ch. 4 - Prob. 9PCh. 4 - Prob. 10PCh. 4 - Suppose you receive 100 at the end of each year...Ch. 4 - You have just received a windfall from an...Ch. 4 - Prob. 13PCh. 4 - You have been offered a unique investment...Ch. 4 - Prob. 15PCh. 4 - Prob. 16PCh. 4 - How would your answer to Problem 16 change if the...Ch. 4 - The British government has a consol bond...Ch. 4 - What is the present value of 1000 paid at the end...Ch. 4 - You are head of the Schwartz Family Endowment for...Ch. 4 - When you purchased your house, you took out a...Ch. 4 - Prob. 22PCh. 4 - Your grandmother has been putting 1000 into a...Ch. 4 - A rich relative has bequeathed you a growing...Ch. 4 - Prob. 25PCh. 4 - You work for a pharmaceutical company that has...Ch. 4 - Your oldest daughter is about to start...Ch. 4 - A rich aunt has promised you 5000 one year from...Ch. 4 - You are running a hot Internet company. Analysts...Ch. 4 - Prob. 31PCh. 4 - Prob. 32PCh. 4 - Prob. 33PCh. 4 - Prob. 34PCh. 4 - Prob. 35PCh. 4 - Prob. 36PCh. 4 - Prob. 37PCh. 4 - Prob. 38PCh. 4 - Prob. 39PCh. 4 - Prob. 40PCh. 4 - Prob. 41PCh. 4 - Prob. 42PCh. 4 - Prob. 43PCh. 4 - Prob. 44PCh. 4 - Prob. 45PCh. 4 - Prob. 46PCh. 4 - Prob. 47PCh. 4 - Prob. 48PCh. 4 - Prob. 49PCh. 4 - Prob. 50PCh. 4 - Prob. 51P
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