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2 years ago

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Marko, Inc., is considering the purchase of ABC Co. Marko believes that ABC Co. can generate cash flows of $4,800, $9,800, and $

16,000 over the next three years, respectively. After that time, they feel the business will be worthless. Marko has determined that a rate of return of 11 percent is applicable to this potential purchase. What is Marko willing to pay today to buy ABC Co.?

1 answer:

Harrizon [31]2 years ago

7 0

Answer:

$23,977.29

Explanation:

In order to determine how much Marko would be willing to pay, we have to calculate the present value of the ABC Co.

Present value is the sum of discounted cash flows

Present value can be calculated using a financial calculator:

Cash flow in year 1 =$4,800

Cash flow in year 2 = $9,800

Cash flow in year 3 = $16,000

I = 11%

Present value = $23,977.29

To find the PV using a financial calacutor:

1. Input the cash flow values by pressing the CF button. After inputting the value, press enter and the arrow facing a downward direction.

2. After inputting all the cash flows, press the NPV button, input the value for I, press enter and the arrow facing a downward direction.

3. Press compute

I hope my answer helps you

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The following data represent the probability distribution of the holding period returns for an investment in Lazy Rapids Kayaks

Brut [27]

Answer:

<u></u>

<u>17.5%</u>

Explanation:

The <em>expected return</em> is the weighted average of the expected returns in each scenario by its respective probability.

The <em>distribution of the holding period returns </em>(HPR) under three different scenarios is:

State of the economy Scenario #(s) Probability, p(s) HPR

HPR Boom 1 0.336 28.40%

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The calculations are:

$E(HPR) = 0.336\times 28.40\%+0.414\times 7.90\%+0.25\times 18.90\%$

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2 years ago

The common stock of Detroit Engines has a beta of 1.34 and a standard deviation of 11.4 percent. The market rate of return is 11

stealth61 [152]

Answer:

The firm's cost of equity is C. 14.05 percent

Explanation:

Hi, we need to use the following formula in order to find the cost of equity of this firm.

$r(e)=rf+beta(rm-rf)$

Where:

r(e) = Cost of equity

rf = risk free rate

rm = Market rate of return

Everything should look like this.

$r(e)=0.04+1.34(0.115-0.04)=0.1405$

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2 years ago

Paris operates a talent agency as a sole proprietorship, and this year she incurred the following expenses in operating her tale

Marrrta [24]

Answer:

The total deductible amount of these expenditures is $450.

Explanation:

Half of any cost of meals and entertainment to which business discussion is associated and appropriate records kept is allowed to be deducted.

Since it is only tickets to the opera with a client following a business meeting that meet this condition, 50% of the total amount of $900 which is $450 is deductible.

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2 years ago

DTO, Inc., has sales of $15 million, total assets of $12.6 million, and total debt of $5.6 million. Assume the profit margin is

Eva8 [605]

Answer:

There the company's net income is $1.2 million.

Explanation:

Solution

Given that:

The Profit Margin is = 8% of Sales

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DTO Inc's Net Income will be 8% of $ 15 million =$ 1,200,000 or $ 1.2 million

=$15 million *8% = $1.2 million

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= $ 1.2 million / $ 12.6 million

= 9.52%

Then

Total Assets = Total Debt + Total Equity

So the Total Assets are $ 12.6 million, and the Total Debt is $ 5.6 million, then the Total Equity works out to $ 7 million.

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2 years ago

Suppose your opportunity cost rate is 11 percent compounded annually. (a) How much must you deposit in an account today if you w

BlackZzzverrR [31]

Answer:

a. Amount = $1653.93

b. Amount = $1835.82

Explanation:

a.

The Present Value is the deposited amount of future payments.

The payments are annuity if they are made at the end of each year.

To compute the present value of an annuity with periodic payment, we'll make use of the following formula:

M(1 - (1 + r)^- T)/ r

Where

M = Periodic Payment = $230

T = Periods = 15

r = rate = 11% = 0.11

So, Amount of Deposit = 230(1 - (1 + 0.11)^-15)/0.11

Amount = 230(1 - (1.11)^-15)/0.11

Amount = 230 ( 1 - 0.209)/0.11

Amount = 230 * 0.791/0.11

Amount = 230 * 7.191

Amount = $1653.93

b.

In this case payments are made at the beginning of each period

This means that the payments are an annuity due.

To compute the present value of an annuity due with periodic payment, we'll make use of the following formula

M((1 + r) - ( 1 + r) ^ ( 1 - T))/r

Amount = 230(( 1 + 0.11) - (1 + 0.11) ^ (1 - 15))/0.11

Amount. = 230((1.11 - 1.11^-14))/0.11

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Amount = $1835.82

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