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lyudmila [28]
2 years ago
12

Xavier Co. wants to purchase a machine for $37,000 with a four year life and a $1,000 salvage value. Xavier requires an 8% retur

n on investment. The expected year-end net cash flows are $12,000 in each of the four years. What is the machine's net present value (round to the nearest whole dollar)?
Business
2 answers:
Nookie1986 [14]2 years ago
7 0
The machine's net present value is $3,481. The net present value is a method of calculating the present value of return of an investment either in capital purchases or projects. The net present value amount is acquired by subtracting the $ 37,000 initial investment from the net present value of $12,000 net cash flow for four years plus the present value of $1000 salvage value at the end of the 4th year.

Net Present Value = Present value of net cash flow + Present value of salvage value - Initial investment

$3,481 = $39,746 + $735 - $37,000
anastassius [24]2 years ago
6 0

Answer:

The answer is $3,481.

Explanation:

We have the net present value of the machine is the sum of present value of the below cash flows discounted at the required rate of return 8%:

Cash outflow at Year 0: Cost of purchasing machine $37,000

4-year annuities from net cash inflow every year: $12,000 each year.

Salvage value recovery at the end of year 4: $1,000.

So the net present value is calculated as below:

-37,000 + (12,000/8%) x [ 1 - (1+8%)^(-4)] + 1,000/(1+8%)^4 = -37,000 + 39,745.52 + 735.03 = $3,480.55

So, the net present value of the machine is $3,841 ( round to the nearest whole dollar).

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Answer:

8.1%

Explanation:

Firstly, let look at the formula for calculating weighted average cost of capital (WACC):

WACC = (D/A) x r_D x (1-t) + (E/A) x r_E + (PE/A) x r_PE, where:

A: Market value of company asset;

D: Market value of company debt;

E: Market value of company equity;

PE: Market value of company preferred equity;

r_D: cost of debt;

r_E: cost of equity/retained earnings;

r_PE: cost of preferred equity;

t: tax rate

Putting all the numbers together, we have:

WACC = 35% x 6.5% x (1-25%) +  55% x  10.5%  + 10% x 6% = 8.1%

8 0
2 years ago
Read 2 more answers
The Mass Rapid Transit (MRT) System in Hong Kong has been running significant losses. Transport Ministry officials have argued o
Aleonysh [2.5K]

Answer:

A) -0.55

B) The  negativity in the estimated elasticity suggests that for every 1% increase in the price of transport there will be a corresponding 0.55% decrease in  the number of Commuters

Explanation:

Given data:

current fare (P0) = $4

hiked fare (P1)  = $6

change in fare = $2

number of rides before increase ( Q0 ) = 10000

number of rides after increase ( Q1 ) = 8000

change in rides = 2000

A) The estimated elasticity of demand for MRT rides using the midpoint /ARC method

Mid point method = [ ( Q1 - Q0 ) / ( Q1 + Q0 ) ] / [ (P1 - P0 ) / (P1 + P0 ) ]

                              = [ - 2000 / 18000 ]  / [ 2 / 10 ]

                              = - 1000 / 1800 =  - 5 / 9 ( estimated elasticity )

= - 0.55

B) The  negativity in the estimated elasticity suggests that for every 1% increase in the price of transport there will be a corresponding 0.55% decrease in Commuters

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"An individual is unique and does not speak for or represent anything other than themselves." This statement is an argument agai
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Answer:

C: stereotypes

Explanation:

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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:

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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:

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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.

3 0
2 years ago
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Sergeeva-Olga [200]

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