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The garden supply company is also considering taking out a loan and buying a small truck to save costs on deliveries. The truck costs $65,000 and is expected to earn end of year after tax net cash inflows of $10000, $15000, $20000 and $25000 for the next four years before it wears out sufficiently to be unreliable and must be sold for an estimated $15000 (after tax).
Problem a. Calculate the NPV of the truck if the interest rate on the loan is 5% pa.
Problem b. Calculate the NPV of the truck if the interest rate on the loan is 10% pa.
Problem c. Advise management of your recommendation regarding purchase of the truck based on your NPV calculations.
Problem d. What additional advice would you give management if the required payback period was three years?
Hubbard argues that the Fed can control the Fed funds rate, but the interest rate that is important for the economy is a longer-term real rate of interest. How much control does the Fed have over this longer real rate?
Coures:- Fundamental Accounting Principles: - Explain the goals and uses of special journals.
Accounting problems, Draw a detailed timeline incorporating the dividends, calculate the exact Payback Period b) the discounted Payback Period. the IRR, the NPV, the Profitability Index.
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Create a cost-benefit analysis to evaluate the project
Theory of Interest: NPV, IRR, Nominal and Real, Amortization, Sinking Fund, TWRR, DWRR
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Your Corp, Inc. has a corporate tax rate of 35%. Please calculate their after tax cost of debt expressed as a percentage. Your Corp, Inc. has several outstanding bond issues all of which require semiannual interest payments.
Simple Interest, Compound interest, discount rate, force of interest, AV, PV
CAPM and Venture Capital
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