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Low-energy light bulbs typically cost $3.60, have a life of nine years, and use about $2.00 of electricity a year. Conventional light bulbs are cheaper to buy, and they cost only $0.60. On the other hand, they last for only a year and use about $7.00 of energy in a year. The discount rate (i.e., interest rate in APR) is 4%. You are deciding whether you should save money today by keeping using cheaper conventional light bulbs that will not last as long, or you should buy the low-energy light bulbs.
(a) Because both types of light bulbs generate about the same amount of light, the only way to choose between them is on the basis of cost. More precisely, the equivalent annual cost (EAC). Can you calculate the low-energy light bulb's EAC, which is the night-year annuity with the same present value as its lifetime costs?
(b) Can you also calculate the conventional light bulb's EAC, which is the one-year annuity with the same present value as its lifetime costs?
(c) Which product is cheaper to use?
Tingham Village issued 500 five-year bonds on July 1, 2012. The interest payments are due semiannually (January 1 and July 1) at an annual rate of 6 percent. The effective interest rate on the bonds is 8 percent. The face value of each bond is $1,..
What is the value of a bond that has a par value of $1,000, a coupon rate of 7.16 percent (paid annually), and that matures in 4 years?
You have kicked off the District 4 Production Warehouse Move project, your contractors are in place and working on receiving the proper building permits.
A car rental firm is currently renting 800 cars per year. How many cars will the firm be renting in 10 years if the demand for car rentals is expected to increase by 7% per year?
XOM corporation has a beta of 2.7. If the market has a return of 11% and the risk free rate is 3%, what is XOMs risk premium?
a firm that owns the stock of another corporation does not have to pay taxes on the entire amount of dividends
Suppose this action will increase sales. What is the incremental costs associated with producing an extra 59,000 jars of sauce?
Why do firms issue stock dividends? Comment on the following statement: “I have a stock that promises to pay a 20 percent stock dividend every year, and therefore it guarantees that I will break even in 5 years.”
At the expiration of the swaption, the LIBOR rates are 10 percent (360 days), 10.5 percent (720 days), 10.9 percent (1,080 days), and 11.2 percent (1,440 days). Assume 360 days in a year. Determine the payoff value of the swaption
Liabilities are simply $700 million in demand deposits. If the reserve requirement is 10%, how much must the bank hold in reserve accounts at the Fed?
Pearl, Inc., has offered $357 million cash for all of the common stock in Jam Corporation. Based on recent market information, Jam is worth $319 million as an independent operation. If the merger makes economic sense for Pearl, what is the minimum..
Compare and contrast knowledge, skills, abilities, and other characteristics (KSAOs) and tasks, duties, and responsibilities (TDRs) as they relate to different processes of job analysis.
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