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Problem - Net present value-unequal lives - Al a Mode, Inc., is considering one of two investment options. Option 1 is a $60,000 investment in new blending equipment that is expected to produce equal annual cash flows of $16,000 for each of seven years. Option 2 is a $70,000 investment in a new computer system that is expected to produce equal annual cash flows of $20,000 for each of five years. The residual value of the blending equipment at the end of the fifth year is estimated to be $10,000. The computer system has no expected residual value at the end of the fifth year.
For purposes of analysis, assume that the blending equipment is adjusted to a five-year life and assume there is sufficient capital to fund only one of these projects. Determine which project should be selected, comparing the
(a) net present values
(b) present value indices of the two projects, assuming a minimum rate of return of 10%.
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.
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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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