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2 years ago

McCann Co. has identified an investment project with the following cash flows.

Business

2 answers:

Vlada [557]2 years ago

8 0

Answer:

Present values @ 11%

Years Present Value

1 $775

2 $982

3 $1075

4 $1070

Present values @ 16%

Years Present Value

1 $741

2 $899

3 $942

4 $897

Present values @ 30%

Years Present Value

1 $662

2 $716

3 $669

4 $569

Explanation:

Cash flows that will be received in future do not have same value as today, because if received today there is an opportunity to reinvest it and get some return. For this reason we calculate the present value of future cash flow.

Discounting method is used to calculate the present values. using following formula of discounting we calculate the PV.

PV = FV / ( 1 + r )^n

Present values @ 11%

Years Cash Flows Discounting Present Value

1 $860 860 x ( 1 + 11%)^-1 $775

2 $1,210 1,210 x ( 1 + 11%)^-2 $982

3 $1,470 1,470 x ( 1 + 11%)^-3 $1075

4 $1,625 1,625 x ( 1 + 11%)^-4 $1070

Present values @ 16%

Years Cash Flows Discounting Present Value

1 $860 860 x ( 1 + 16%)^-1 $741

2 $1,210 1,210 x ( 1 + 16%)^-2 $899

3 $1,470 1,470 x ( 1 + 16%)^-3 $942

4 $1,625 1,625 x ( 1 + 16%)^-4 $897

Present values @ 30%

Years Cash Flows Discounting Present Value

1 $860 860 x ( 1 + 30%)^-1 $662

2 $1,210 1,210 x ( 1 + 30%)^-2 $716

3 $1,470 1,470 x ( 1 + 30%)^-3 $669

4 $1,625 1,625 x ( 1 + 30%)^-4 $569

As the discount rate increase the Present value of the cash flows decreases because of discounting factor.

Ugo [173]2 years ago

7 0

Answer:

The present value at 11% is $3,902.13,$3,479.85 at 16% and $2,615.57 at 30%

Explanation:

The present value formula is given as :

PV=FV/(1+r)^n

Where FV is the future value of cash flows such as the ones given in the question

r is the rate of return at 11%,16% and 30%

n is the applicable time horizon relevant to each of the cash flow.

Find attached spreadsheet for detailed calculations.

Download xlsx

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Patterson Brothers recently reported an EBITDA of $16.5 million and net income of $2.6 million. It had $2.0 million of interest

maria [59]

Answer:

Depreciation and amortization = $10,500,000

Explanation:

EBT = Net Income / (1 - Tax rate)

EBT = 2,600,000 / (1 - 0.35)

EBT = $4,000,000

EBIT = EBT + Interest

EBIT = $4,000,000 + $2,000,000

EBIT = $6,000,000

EBIT = EBITDA - Depreciation and amortization

$16,500,000 = $6,000,000 - Depreciation and amortization

Depreciation and amortization = $16,500,000 - $6,000,000

Depreciation and amortization = $10,500,000

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2 years ago

You are 40 years old. Your investment portfolio currently consists of: (1) a savings account, with a $16,000 balance, (2) certif

murzikaleks [220]

Answer:

Option C is correct one.

The investment strategy is conservative.

Explanation:

This is so because most of the money is either in cash or certificates of deposits. Portfolio also consists 40% of bonds with 6% interest rate and 40% equities are also only of the employer's stock. The rate of appreciation and dividend is also very low on this stock. Hence due to all these factors we can say the strategy is conservative.

8 0

2 years ago

Gomez runs a small pottery firm. He hires one helper at $13,000 per year, pays annual rent of $5,500 for his shop, and spends $2

alisha [4.7K]

Answer:

(a) $35,000

(b) $8,000

Explanation:

(a) Accounting profit:

= Total revenue - Explicit cost

= $75,000 - (wages + Annual rent + Material cost)

= $75,000 - ($13,000 + $5,500 + $21,500)

= $75,000 - $40,000

= $35,000

(b) Economic Profit:

= Total revenue - Explicit costs - Implicit costs

= $75,000 - (wages + Annual rent + Material cost) - (Income from investment + Earnings as a potter + Worth of entrepreneurial talents)

= $75,000 - ($13,000 + $5,500 + $21,500) - ($5,500 + $19,000 + $2,500)

= $75,000 - $40,000 - $27,000

= $8,000

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2 years ago

In what areas is Leslie's underspending hurting her budget?

Jlenok [28]

Leslie's budget is hurting in the areas of transportation, groceries, phone and dining out.

Explanation:

For transportation, cash is required for every day. So Leslie is spending more on transportation every month. Forgoing back and forth out anyplace she will burn through cash on transportation.

She is likewise spending cash on goods. Staple goods will be an essential one for living these days. So the financial backing is harming here.

She is spending another hand on the telephone and eating out. For the telephone, she will energize each month. She will feast out with companions each day.

5 0

2 years ago

Read 2 more answers

A trader creates a long butterfly spread from options with strike prices $60, $65, and $70 by trading a total of 400 options. Th

malfutka [58]

Answer:

$400

Explanation:

From the question, there is a butterfly spread when a trader buys 100 options with strike prices $60 and $70 and sells 200 options with strike price $65.

The maximum gain is the point where both the stock price and the middle strike price are equal, i.e. equal to $65. At that point, the options payoffs are respectively $500, 0, and 0. By implication, the total payoff is $500.

The set up cost of the butterfly spread can be calculated as follows:

Setup cost = ($11×100) + ($18×100) – ($14×200)

= 1,100 + 1,800 – 2,800

Setup cost = $100

Net gain = Options payoffs – Setup cost = $500 - $100 = $400

Therefore, the maximum net gain (after the cost of the options is taken into account) is $400.

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2 years ago