0.96.
To best compute this problem, use your financial calculation to input the initial outflow (investment) of $38,000 and the four cash inflows ($12,000 in each of Yr 1, 2, and 3, and $6,500 in Yr 4). Then use the NPV calculation with the 7% discount rate to find the NPV for the project of -$1,549.
Using this NPV along with the initial investment, compute the profitability index by adding the NPV and the initial investment then dividing this sum by the initial investment.
profitability index = (NPV + initial investment) / initial investment
0.96 = (-$1,549 + $38,000) / $38,000
Just by reading the excerpt we can say that between October and December prices for beef were high. As were Janurary and March because they only sold 10,000 pounds between the months of October and December. July and September was a good month yet they still did not sell as much as they did Between the months of April and June. So the answer is C) April and June
Answer: $1091.61
Explanation:
From the question, we are told that fifteen years ago, Mr. Fairhold paid $50,000 for a single-premium annuity contract and that this year, he began receiving a $1,300 monthly payment that will continue for his life and based on his age, he can expect to receive $312,000. The amount of each monthly payment is taxable income to Mr. Fairhold goes thus:
Based on the question, Mr Fairhold will have a tax free return of the $50,000 paid. The exclusion ratio will be the investment divided by the expected return. This will be:
= $50,000/$312,000
= 0.1603
Since he received monthly payment of $1,300 and exclusion ratio is 0.1603, the tax free return on investment will be:
= $1,300 × 0.1603
= $208.39
Taxable annuity payment will now be:
= $1300 - $208.39
= $1091.61
The constant in a system is the control.
