expected Isabella owns a roller rink that is worth $760,000.00 and is expected to make annual cash flows forever. The cost of capital for the roller rink is 8.87%. The next annual cash flow one year from today and all subsequent cash flows are expected to grow annually by 2.19%. What is the cash flow produced by the roller rink in 2 years from today expected to be? O $51,879.82 (plus or minus 10 dollars) O $60,173.67 (plus or minus 10 dollars) O $53,015.99 (plus or minus 10 dollars) O $68,888.32 (plus or minus 10 dollars) O none of the answers are within 10 dollars of the correct answer

expected Isabella owns a roller rink that is worth $760,000.00 and is expected to make annual cash flows forever. The cost of capital for the roller rink is 8.87%. The next annual cash flow one year from today and all subsequent cash flows are expected to grow annually by 2.19%. What is the cash flow produced by the roller rink in 2 years from today expected to be? O $51,879.82 (plus or minus 10 dollars) O $60,173.67 (plus or minus 10 dollars) O $53,015.99 (plus or minus 10 dollars) O $68,888.32 (plus or minus 10 dollars) O none of the answers are within 10 dollars of the correct answer

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter11: Capital Budgeting Decisions

Section: Chapter Questions

Problem 1PA: Your company is planning to purchase a new log splitter for is lawn and garden business. The new...

See similar textbooks

Similar questions

You own building V and building S. The next cash flow for each building is expected in 1 year. Building V has a cost of capital of 17.20 percent and is expected to produce annual cash flows of $369,045.00 forever. Building S is worth $6,214,435.00 and is expected to produce annual cash flows of $169,044.00 forever. Which assertion is true? O Building V is more valuable than building S and building V is more risky than building S Building S is more valuable than building V and building S is more risky than building V O Building V is more valuable than building S and building S is more risky than building V O Building S is more valuable than building V and building V is more risky than building S Building V and building S either have the same value, the same level of risk, or both the same value and level of risk. لا
Joan owns a tanning salon that is expected to produce annual cash flows forever. The tanning salon is worth $902,400.00 and the cost of capital is 11.78%. Annual cash flows are expected with the first one due in one year and all subsequent ones growing annually by 10.00%. What is the amount of the annual cash flow produced by the tanning salon in 1 year expected to be? $506,966.29 (plus or minus $10) $196,542.72 (plus or minus $10) $16,062.72 (plus or minus $10) $50,696,629.21 (plus or minus $10)
Your friend is considering investing $10,000 starting at the end of year 1 in an investment account and this cash flow will then grow at an annual rate of 4%. She plans on ending her contribution to the investment account at the end of year 10. If the annual return on the investment account is expected to be 10%, the future value of this investment at the end of year 10 will be closest to: O $166,667. O $71,550. $185,583. $100,000.
Josh purchased a new machine for his business. Josh expects to produce 80 products at P 100,000.00 per item in each of the first 3 years, after which it expects to produce 100 products per year at P 125,000.00 per item through year 8. If Josh's minimum attractive rate of return is 18% per year, what is the present worth of the expected revenue? Draw the cash flow diagram.
You own building P and building X. The next cash flow for each building is expected in 1 year. Building P has a cost of capital of 8.20 percent and is expected to produce annual cash flows of $470,328.00 forever. Building X is worth $5,082,013.00 and is expected to produce annual cash flows of $124,252.00 forever. Which assertion is true? O Building P is more valuable than building X and building P is more risky than building X O Building P is more valuable than building X and building X is more risky than building P O Building X is more valuable than building P and building P is more risky than building X O Building X is more valuable than building P and building X is more risky than building P O Building P and building X either have the same value, the same level of risk, or both the same value and level of risk.
You own building U and building M. The next cash flow for each building is expected in 1 year. Building U has a cost of capital of 13.60 percent and is expected to produce annual cash flows of $141,820.00 forever. Building M is worth $5,359,454.00 and is expected to produce annual cash flows of $423,016.00 forever. Which assertion is true? O Building M is more valuable than building U and building U is more risky than building M O Building U is more valuable than building M and building U is more risky than building M O Building M is more valuable than building U and building M is more risky than building U O Building U is more valuable than building M and building M is more risky than building U O Building U and building M either have the same value, the same level of risk, or both the same value and level of risk.
Frieda Frost recently invested $3,125 in a project that is promising to return 10 percent per year. The cash flows are expected to be as follows: End of Year Cash Flow 1yr 597 2yr 527 3yr 540 4yr ???? 5yr 555 Note that the cash flow in year 4 is missing . Determine the Year 4 missing cash flow that will make the present value of this series equal to the amount Frieda invested ( that is , $ 3,125 )? Record your answer as a dollar amount rounded to 2 decimal places , but do not include a dollar sign or any commas in your answer . For example , enter $ 12,327.24987 as 12327.25 .
Blossom Googal owns a garage and is contemplating purchasing a tire retreading machine for $32.820. After estimating costs and revenues, Blossom projects a net cash inflow from the retreading machine of $4,700 annually for 11 years. Blossom hopes to earn a return of 8% on such investments. Click here to view the factor table. (For calculation purposes, use 5 decimal places as displayed in the factor table provided.) What is the present value of the retreading operation? (Round answer to 2 decimal places, eg. 25.25) Present value 2$ Should Blossom Googal purchase the retreading machine?
What is the IRR of the following project? Invest $1000 in a new machine today that will generate $300 of annual after tax cash flows for 6 years (at the end of each year). What is your IRR? 24.8% 21.2% 19.9% 25.6% $25
The value of an investment comes from its cash flows. Let’s say you are intent on receiving $45,000 per year, starting at the end of year one and continuing over 10 years. A lump sum of $380,000 invested now (year 0) will allow you to receive your desired annual amount. What interest rate is required to make this happen?
The LMN Corporation is considering an investment that will cost $80,000 and have a useful life of 4 years. During the first 2 years, the net incremental after-tax cash flows are $25,000 per year and for the last two years they are $20,000 per year. What is the payback period for this investment?
You paid $725,000 for a duplex and financed 75% of the purchase price. Your forecasted cash flows for the property are listed below and you expect to sell the property for $740,000 at the end of year 5 and you owe $499,318.73 on the property. What is your expected internal rate of return? Cash flow - year 1 $16,000 Cash flow - year 2 $17,000 Cash flow - year 3 $16,000 Cash flow - year 4 $15,000 Cash flow - year 5 $18,000 Answer should be formatted as a percent with two decimal places.