Compute the future worths of projects at the end of period

Assignment Help Financial Management
Reference no: EM13811314

Consider the following after-tax cash flows:

n                      A                     B

0                      -2500              -5000

1-6                  2000               2500

7                      2000               0

MARR is 10% (compounded annually)

(a) Compute the future worth’s of the projects at the end of period 7.

(b) Assume that the required service period is seven years and that the company is considering a comparable equipment that has an annual lease expense of $10,000 for period seven (to be paid at the end of year 7), if project B is chosen. This will result in an income of $12,500 at the end of period 7. Which project is the better choice, using present worth as the criteria?

Reference no: EM13811314

Questions Cloud

Managing people and organizations : You will prepare and submit a research paper on an approved topic related to Managing People and Organizations. The length of the paper should be somewhere between 12 and 15 pages and include at least 10 academic resources. (Usually, an academic r..
Capital structure have on firms profit-return on equity : Seattle Health Plans currently uses zero debt financing. Its operating profit is $1 million, and it pays taxes at a 40 percent rate. It has $5 million in assets and, because it is all-equity financed, $5 million in equity. What impact would the new c..
Deposit the present value-investment account : Bill O'Blarney tells you that he plans to give you $1 million as a birthday present on your 75th birthday. You are now 25—and a bit skeptical. You suggest that he deposit the present value of this nice gift today in an investment account for you. If ..
Determine which version of the software should be used : Microsoft has released Windows Server 2008. As with Windows 2003, there are several versions of the server software. What are these versions, and what are the criteria that determine which version of the software should be used
Compute the future worths of projects at the end of period : Compute the future worth’s of the projects at the end of period 7. Assume that the required service period is seven years and that the company is considering a comparable equipment that has an annual lease expense of $10,000 for period seven (to be p..
Google model of principal cloud computing services : Based on the Barr (2010) article, how can the Google model of principal cloud computing services-similar in function to Windows Azure cloud computing infrastructure-be used as a substitute for on-premises disk management
What is the interest rate in the korean market : Suppose that a US interest rate is 4% and the forward rate for the Korean won is 1 won = $0.001 and the spot rate is 1 won = $0.0011. What is the interest rate in the Korean market? (Assume that the US is home and the interest rate parity holds.) Ple..
Write a journal on makers eye revising your own manuscripts : Write a journal about the essay "The Maker's Eye: Revising Your Own Manuscripts" by Donald M. Murray. What lessons about writing do you take from reading this eesay?
Ratio of credit provision over total assets : Provision for Credit Loss It is earnings season and I want you to look into annual report of bank of America and Citigroup. Using the last five years of Bank of America and Citigroup annual report, let us discuss the impact of loan loss provision on ..

Reviews

Write a Review

Financial Management Questions & Answers

  Perform vertical analysis on the income statements

Perform vertical analysis on the income statements and balance sheet information for fiscal periods 2011 and 2010.

  Present and future value interest factors

Given r and t greater than zero, what is true concerning Lump Sum present and future value interest factors? present value interest factors are less than 1

  Changes in the value of the euro relative to the dollar

A ski resort in Vail Colorado is relying on 30% of its anticipated 28,000 customers coming from Europe this winter. The resort's amenities and services are all dollar priced but you know that changes in the value of the euro relative to the dollar wi..

  Evaluate optimal strategy of hedging

FHC Inc., a U.S. corporation, has an account payable due in 90 days. Use the following information to evaluate the optimal strategy of hedging its transactional exposure - MMHC Inc., a U.S. corporation, has an Euro-denominated account receivable i..

  Nominal and effective costs of trade credit

Grunewald Industries sells on terms of 3/10, net 50. Gross sales last year were $4,972,000, and accounts receivable averaged $488,000. Half of Grunewald's customers paid on the 10th day and took discounts. What are the nominal and effective costs of ..

  What is this projects internal rate of return

Big Steve's, makers of swizzle sticks, is considering the purchase of a new plastic stamping machine. This investment requires an initial outlay of $950000 and will generate net cash inflows of $17,000 per year for 11 years. What is the project's NPV..

  Do dividends grow at the same rate as earnings

Prepare a term paper on Do dividends grow at the same rate as earnings and is the Gordon Model fact or fiction

  Explain collateral and conditions

The five Cs of credit are character, capacity, capital, collateral, and conditions. Review each of the four items mentioned in the article and then state which one of the Cs each would represent.

  Compute the cost of capital for the firm

Compute the cost of capital for the firm for the following: a. A bond that has a $1,000.00 par value (face value) and a contract or coupon interest rate of 11.7 percent. Interest payments are $58.50 and are paid semi annually. The bonds have current ..

  What is the value of the investment today

An investment offers $10,400 per year for 13 years, with the first payment occurring 1 year from now. Assume the required return is 12 percent.What is the value of the investment today? What would the value be if the payments occurred for 38 years?

  The index number representing the price level changes

The index number representing the price level changes from 110 to 115 in one year, and then from 115 to 120 the next year. Since the index number increases by five each year, is five the inflation rate each year? Is the inflation rate the same each y..

  What is the present value of your winnings

You just won the TVM Lottery. You will receive $1 million today plus another 10 annual payments that increase by $600,000 per year. Thus, in one year, you receive $1.6 million. In two years you get $2.2 million, and so on. If the appropriate interest..

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd