Corporate Finance Plus MyLab Finance with Pearson eText -- Access Card Package (4th Edition) (Berk, DeMarzo & Harford, The Corporate Finance Series)
4th Edition
ISBN: 9780134408897
Author: Jonathan Berk, Peter DeMarzo
Publisher: PEARSON
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Textbook Question
Chapter 4, Problem 17P
How would your answer to Problem 16 change if the machine takes one year to build?
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I have two projects that I am evaluating: project A,
where the initial investment is 5,000TL and the
annual return is 5,000TL, and project B where the
initial investment is 8,000TL and annual return is
6,000TL. Both projects are for 5 years. I have
done my calculations and I cannot select
between these two. What is my MARR?
Write your answer as a decimal number, with at
least one digit after the decimal point. If your
result is 10.5% just write 10.5 (DO NOT write it as
0.105 or DO NOT put a percentage sign)
For items 3-4
Check at the table to answer the questions.
ENDING
STARTING
BALANCE
INTEREST
MONTH
BALANCE
EARNED
1
P1 000.00
2.5
P 1 002.5
2
P1 002.5
2.51
P1 005.01
P1 005.01
2.51
P 1 007.52
4
P 1 007.52
2.52
P1010.04
P 1 010.04
2.53
P1 012.57
P1 012.57
2.53
P1 015.10
7
P 1 015.10
2.54
P 1017.64
8
P1017.64
2.54
P1 020.18
P 1 020.18
2.55
P 1 022.73
10
P 1 022.73
2.56
P 1 025.29
11
P1 025.29
2.56
P 1 027.85
12
P 1 027.85
2.57
P1 030.42
3. Determine the annual interest rate, compounded monthly. Show the complete
solution.
What is the payback period on each of the above projects?
Given that you wish to use the payback rule with a cutoff period of two years, which projects would you accept? Why?
If you use a cutoff period of three years, which projects would you accept? Why?
If the opportunity cost of capital is 10%, which projects have positive NPVs? How do you know?
“If a firm uses a single cutoff period for all projects, it is likely to accept too many short-lived projects.” Is this statement true or false? How do you know?
If the firm uses the discounted-payback rule, will it accept any negative NPV projects? Will it turn down any positive NPV projects? How do you know?
Chapter 4 Solutions
Corporate Finance Plus MyLab Finance with Pearson eText -- Access Card Package (4th Edition) (Berk, DeMarzo & Harford, The Corporate Finance Series)
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 - You have a loan outstanding. It requires making...Ch. 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. 30PCh. 4 - Prob. 32PCh. 4 - Your firm spends 5000 every month on printing and...Ch. 4 - You have just entered an MBA program and have...Ch. 4 - Your credit card charges an interest rate of 2%...Ch. 4 - You have decided to buy a perpetuity. The bond...Ch. 4 - You are thinking of purchasing a house. The house...Ch. 4 - You would like to buy the house and take the...Ch. 4 - You have just made an offer on a new home and are...Ch. 4 - Prob. 40PCh. 4 - Prob. 41PCh. 4 - You are saving for retirement. To live...Ch. 4 - Prob. 43PCh. 4 - Prob. 44PCh. 4 - Prob. 45PCh. 4 - Prob. 46PCh. 4 - Prob. 47PCh. 4 - Prob. 48PCh. 4 - You are shopping for a car and read the following...Ch. 4 - Prob. 50PCh. 4 - Prob. 51PCh. 4 - The Tillamook County Creamery Association...
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