Problem 03.005 Present Worth CalculationsCivil engineering consulting firms that provide services to outlying communities are vulnerable to a number of factors thataffect the financial condition of the communities, such as bond issues, real estate developments, etc. A small consulting firmentered into a fixed-price contract with a spec home builder, resulting in a stable income of $395,000 per year in years 1through 7. At the end of that time, a mild recession slowed the development, so the parties signed another contract for$180,000 per year for 4 more years. Determine the present worth of the two contracts at an interest rate of 7% per year.The present worth of the two contracts is determined to be $1

Information Provided: Interest rate = 7% Cashflow (Year 1-7) = $395,000 Cashflow (Year 8-11) =…

Answered: The present worth of the two contracts…

Business

Finance

The present worth of the two contracts is determined to be $

Essentials of Business Analytics (MindTap Course List)

2nd Edition

ISBN:9781305627734

Author:Jeffrey D. Camm, James J. Cochran, Michael J. Fry, Jeffrey W. Ohlmann, David R. Anderson

Publisher:Jeffrey D. Camm, James J. Cochran, Michael J. Fry, Jeffrey W. Ohlmann, David R. Anderson

Chapter6: Statistical Inference

Section: Chapter Questions

Problem 24P: The manager of an automobile dealership is considering a new bonus plan designed to increase sales...

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Civil engineering consulting firms that provide services to outlying communities are vulnerable to a number of factors that affect the financial condition of the communities, such as bond issues and real estate developments. A small consulting firm entered into a fixed-price contract with a large developer, resulting in a stable income of $260,000 per year in years 1 through 3. At the end of that time, a mild recession slowed the development, so the parties signed another contract for $190,000 per year for 2 more years. Determine the present worth of the two contracts at an interest rate of 10% per year.
Chang Consulting. Inc., has a $15,000 overdue debt with Supplier No. 1. The company is low on cash, with only $4,000 in the checking account and does not want to borrow any more cash. Supplier No. 1 agrees to settle the account in one of two ways: Option 1: Pay $4,000 now and $18.750 when some large projects are finished, two years from today. Option 2: Pay $25,000 three years from today, when even larger projects are finished. Assuming that the only factor in the decision is the cost of money (8%), which option should Clary choose?
4. Present value of an income stream Read No Evil (RNE) is a firm specializing in the destruction of sensitive documents. An industrial paper shredder costs $8,000. If bought, it would raise RNE's revenue by an additional $400 per year. The machine is designed to last forever and never require maintenance. If the firm does not purchase the machine, it will put the money into an interest-bearing bank account. At which interest rates would RNE be willing to buy the machine? Check all that apply. 12% 4% 6% 1%
Ralston Consulting. Inc., has a $25,000 overdue debt with Supplier No. 1. The company is low on cash, with only $7,000 in the checking account and does not want to borrow any more cash. Supplier No. 1 agrees to settle the account in one of two ways: Option 1: Pay 57,000 now and $23,750 when some large projects are finished, two years from today. Option 2: Pay $35,000 three years from today, when even larger projects are finished. Assuming that the only factor in the decision is the cost of money (8%). which option should Ralston choose?
The economic downturn in 20082009 resulted in the loss of jobs and an increase in delinquent loans for housing. In projecting where the real estate market was headed in the coming year, economists studied the relationship between the jobless rate and the percentage of delinquent loans. The expectation was that if the jobless rate continued to increase, there would also be an increase in the percentage of delinquent loans. The following data show the jobless rate and the delinquent loan percentage for 27 major real estate markets. Source: The Wall Street Journal, January 27, 2009. a. Compute the correlation coefficient. Is there a positive correlation between the jobless rate and the percentage of delinquent housing loans? What is your interpretation? b. Show a scatter diagram of the relationship between the jobless rate and the percentage of delinquent housing loans.
Troy Engines, Limited, manufactures a variety of engines for use in heavy equipment. The company has always produced all of the necessary parts for its engines, including all of the carburetors. An outside supplier has offered to sell one type of carburetor to Troy Engines, Limited, for a cost of $30 per unit. To evaluate this offer, Troy Engines, Limited, has gathered the following information relating to its own cost of producing the carburetor internally: Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead, traceable Fixed manufacturing overhead, allocated Total cost $34 *One-third supervisory salaries; two-thirds depreciation of special equipment (no resale value). Required 1 Required 2 Per Unit Required 3 Required: 1. Assuming the company has no alternative use for the facilities that are now being used to produce the carburetors, what would be the financial advantage (disadvantage) of buying 13,000 carburetors from the outside supplier? 2.…
Question Content Area Ralston Consulting, Inc., has a $48,000 overdue debt with Supplier No. 1. The company is low on cash, with only $13,440 in the checking account and does not want to borrow any more cash. Supplier No. 1 agrees to settle the account in one of two ways: Option 1: Pay $13,440 now and $45,600 when some large projects are finished, two years from today. Option 2: Pay $67,200 three years from today, when even larger projects are finished. Assuming that the only factor in the decision is the cost of money (10%). (Click here to see present value and future value tables) A. Calculate the present value of each option. Round your present value factor to three decimal places and final answer to the nearest dollar. Present value of Option 1 $fill in the blank 1 Present value of Option 2 $fill in the blank 2 B. Which option should Ralston choose?
10.A business segment that has responsibility for both revenues and expenses is called__________________ 11. Suppose an office building is owned for which long-term leases have been signed, the tenants pay utilities and operating costs, and straight-line depreciation is taken. The rate of return on the book value of this investment can be expected to _____________________ 12. An advantage of centralization is ______________________ 13. ROI will decrease if ____________________ 14. Operating income is __________________
4211 1.Return on Investment for Multiple Investments, Residual Income The manager of a division that produces add-on products for the automobile industry has just been presented the opportunity to invest in two independent projects. The first is an air conditioner for the back seats of vans and minivans. The second is a turbocharger. Without the investments, the division will have average assets for the coming year of $29.4 million and expected operating income of $4.335 million. The outlay required for each investment and the expected operating incomes are as follows: Air conditioner Turbocharger Outlay $1,150,000 $540,000 Operating income 90,000 114,080 Required: 1. Compute the ROI for each investment project. Round to the nearest whole percent. Air conditioner, ROI fill in the blank 1 % Turbocharger, ROI fill in the blank 2 % 2. Compute the budgeted divisional ROI for each of the following four alternatives. Round to two decimal places. a. The air…
Joe’s Build Back Better (BBB) Ammo Corp has$15 million in cash, which it has accumulated from retained earnings. It was planning to use the money to build a new factory. Recently, the interest rate has increased. How does this influence the company's decision, assuming the alternative to investing in a factory is loaning the money out? (A)It doesn’t, since the company’s shareholders are expecting a new factory. (B)It is more likely to build the factory because a higher interest rate makes the factory more valuable. (C)It is less likely to build the factory, since the opportunity cost of using the funds to build a factory rises with a higher interest rate. (D)It doesn’t influence their decision, since the company does not need to borrow money to build the factory.
Sheaves Corporation economists estimate that a good business environment and a bad business environment are equally likely for the coming year. Management must choose between two mutually exclusive projects. Assume that the project chosen will be the firm’s only activity and that the firm will close one year from today. The firm is obligated to make a $4,400 payment to bondholders at the end of the year. The projects have the same systematic risk, but different volatilities. Consider the following information pertaining to the two projects: Economy Probability Low-VolatilityProject Payoff High-VolatilityProject Payoff Bad .50 $4,400 $3,800 Good .50 5,050 5,650 a. What is the expected value of the firm if the low-volatility project is undertaken? What if the high-volatility project is undertaken? (Do not round intermediate calculations and round your answers to the nearest whole dollar, e.g., 32.) b. What is the…
39- Akkudu Ltd. is a manufacturing company that produces electronic gadgets in bulk quantities for its customers in Oman. The company was able to sustain a reasonable amount of sales in the last two quarters despite the pandemic-crisis during the last year. However, the company has faced some serious liquidity problems due to delayed payment by the customers and lower sales in the first two quarters. Hence, the company is seriously thinking about revising its working capital standards by considering the changes in the market. The finance manager of the company is seeking your help in assessing the average payment period from the following financial data. During the last year the company started its operations with an opening stock of OMR 22,000 and made a purchase of 50,000 OMR. The company has returned OMR 5000 worth material due to quality issues. During the last year, the business has paid OMR 6000 as wages. The company sold goods for a total amount of OMR 80,000 of which OMR…