Suppose that a new machine tool having a useful life of only one year costs $80,000. Suppose, also, that the net additional revenue resulting from buying this tool is expected to be $92,000. The expected rate of return on this tool is 15 percent. 85 percent. 20 percent. 10 percent.

Suppose that a new machine tool having a useful life of only one year costs $80,000. Suppose, also, that the net additional revenue resulting from buying this tool is expected to be $92,000. The expected rate of return on this tool is 15 percent. 85 percent. 20 percent. 10 percent.

Microeconomics A Contemporary Intro

10th Edition

ISBN:9781285635101

Author:MCEACHERN

Publisher:MCEACHERN

Chapter13: Capital, Interest, Entrepreneurship, And Corporate Finance

Section: Chapter Questions

Problem 11PAE

See similar textbooks

Similar questions

What is the principal goal of a firm like CorpCo? As a managerial economist how would you define an ‘optimal decision’ for a firm? The firm is considering investing $300,000 for a period of five years. Expected earnings are $50,000 in year 1, $60,000 in year 2, $75,000 in year 3 and $90,000 in years 4 and 5. Should the firm decide to invest, if the interest rate is 8%? The firm paid a dividend of $6 during the past year and it estimates dividends to grow at 7% annually in the future. Firm’s stockholders require a rate of return of 14%. What would be the expected value of each share today? Which are the two basic risks affecting returns when shareholders value any business? Briefly explain.
"A corporation is trying to decide whether to buy the patent for a product designed by another company. The decision to buy will mean an investment of $9.6 million, and the demand for the product is not known. If demand is light, the company expects a return of $2 million each year for the first three years and no return in the fourth year. If demand is moderate, the return will be $2.73 million each year for four years, and high demand means a return of $5.4 million each year for four years. It is estimated the probability of a high demand is 0.47, and the probability of a light demand is 0.21. The firm's interest rate is 15.7%.Calculate the expected present worth of the patent. Express your answer in millions of dollars. For example, if the answer is $12.3 million, enter 12.3. (All figures represent after-tax values.)"
A clothing manufacturing firm is deciding whether to invest in a new technology that needs an initial investment of $45,000. This will increase cash flows in the first year by $25,000 and $30,000 in the second year. The firm’s current fixed costs are $9,000 and marginal cost is $15. The firm currently charges $18 per unit. What’s the firm’s contribution margin?
You run a display ad campaign for a product that your firm markets. The campaign generates 28 million impressions, with a click rate of 0.038% and a conversion rate of 1.74%. The margin of each unit of product sold is $383, and consumers typically buy only one unit of the product at a time. The website sells impressions at a cost of $2 per thousand impressions (CPM). What is the return on investment for your firm? Group of answer choices 14.8% 26.6% 79.0% 127% 149.2%
Suppose that the price of a barrel of oil is $80 and interest rates remain at 8%. If a new technology is implemented in one of the wells and it costs $3,000,000. Calculated the estimated "profit" from outfitting one of our wells with this new technology.
Yogajothi is thinking of investing in a rental house. The total cost to purchase the house, including legal fees and taxes, is $240,000. All but $30,000 of this amount will be mortgaged. He will pay $1700 per month in mortgage payments. At the end of two years, he will sell the house and at that time expects to clear $50,000 after paying off the remaining mortgage principal (in other words, he will pay off all his debts for the house and still have $50,000 left). Rents will earn him $2500 per month for the first year and $2900 per month for the second year. The house is in fairly good condition now, so he doesn't expect to have any maintenance costs for the first six months. For the seventh month, Yogajothi has budgeted $500. This figure will be increased by $50 per month thereafter (e.g., the expected month 7 expense will be $500, month 8, $550, month 9, $600, etc.). If interest is 6 percent compounded monthly, what is the present worth of this investment? Given that Yogajothi's…
Yogajothi is thinking of investing in a rental house. The total cost to purchase the house, including legal fees and taxes, is $230,000. All but $20,000 of this amount will be mortgaged. He will pay $1500 per month in mortgage payments. At the end of two years, he will sell the house and at that time expects to clear $40,000 after paying off the remaining mortgage principal (in other words, he will pay off all his debts for the house and still have $40,000 left). Rents will eam him $2500 per month for the first year and $2800 per month for the second year. The house is in fairly good condition now, so he doesn't expect to have any maintenance costs for the first six months. For the seventh month, Yogajothi has budgeted $300. This figure will be increased by $30 per month thereafter (e.g., the expected month 7 expense will be $300, month 8, $330, month 9, $360, etc.). If interest is 6 percent compounded monthly, what is the present worth of this investment? Given that Yogajothi's…
Quick Computing currently sells 10 million computer chips each year at a price of $20 per chip. It is about to introduce a new chip, and it forecasts annual sales of 12 million of these improved chips at a price of $25 each. However, demand for the old chip will decrease, and sales of the old chip are expected to fall to 3 million per year. The old chips cost $6 each to manufacture, and the new ones will cost $8 each. What is the proper cash flow to use to evaluate the present value of the introduction of the new chip? Note: Enter your answer in millions.
Ben is a retired budget auditor who is currently looking for a new investment opportunity. He is considering two investments: Calzone Zone, a small restaurant specialising in calzone, and Icetown, a skating and curling rink. The projected cash flows of the two investments are shown below. Ben can only choose one projects, so he asks for your help and advice in reaching a decision on which investment to accept. He tells you he requires a 5% rate of return on his investment. Calzone Icetown Zone Cash flows £000 £000 Initial investment (885) 150 (300) 215 Cash flows year 1 Cash flows year 2 Cash flows year 3 Cash flows year 4 Cash flows year 5 195 215 200 230 265 215 215 (585) Assume the initial investment arises at the start of the first year of the project and all the subsequent cash flows occur at the end of the year. Question A. What are the economic factors reflected in the required rate of return? Discuss the likely effects of the economic shock brought by the COVID-19 pandemic on…
Although appealing to more refined tastes, art as a collectible has not always performed so profitably. During 2003, Sotheby’s sold the Edgar Degas bronze sculpture Petite Danseuse de Quatorze Ans at auction for a price of $10.45 million. Unfortunately for the previous owner, he had purchased it in 1999 at a price of $12.89 million. What was his annual rate of return on this sculpture?
Suppose that you are trying to make a decision regarding the purchase of a new machine for the plant that you are working on. You have three criteria to consider. First of all, in these hard times, the price of the machine is very important for you. On the other hand, the throughput rate is also very important for you since you are anticipating higher demand in the future and you should have enough production to satisfy the customer demand. Finally, energy consumption is an issue that your company is sensitive to not only for the cost issues but also green production seems to be very important particularly for your customers. You have decided to adopt the additive utility function for the overall utility from these three criteria. Thus, the next thing for you is to determine the relative weights of the criteria. Suppose you used Swing Weighting and obtained the following table as the result of the process. What is the weight of the price?
34. Skyscrapers Corporation is engaged in the manufacturing of standard wide flange section of steel whose selling price is P690. For the average monthly production of wide flange, the cost of production y is approximately related to the number of units produced x by the following equation. y = 0.5x? + 400x + 24,000. What is investment rate corresponding to a volume of production to earn the maximum rate of return of capital