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A wise consumer decides to perform an economic analysis to compare two different automobiles intended for use over the next 8 years. The first auto, manufactured by Gord and named the Pony, averages 21 miles per gallon and costs $23,000. Consumer Reports says that the time between failures is gamma with a shape parameter of 2.8 and a scale parameter of 4000 miles with an average repair cost of $480. Routine servicing is required every 5000 miles at a cost of $120. Trade-in value after 8 years is estimated to be $9500. The second auto, manufactured by General Auto (GA) and named the Neptune, averages 19 miles per gallon and costs $21,000. It has a time between failure distribution that Consumer Reports says is minimum extreme value with a scale parameter of 820 and a location parameter of 9100 miles. Average repair cost as advertised by GA is $395. Routine servicing is required every 7000 miles at a cost of $150. Trade-in value after 8 years is estimated to be $11,000. The wise consumer averages 16,000 miles per year and has an available investment rate of return of 4 percent. Inflation is expected to average 3.2 percent over the next decade. Given the cost of gasoline will average $2.80 a gallon, which automobile should be purchased based only on the economic data provided? How would the life cycle costs compare if the cost of gasoline averages $3.50 a gallon and the automobile is driven 18,000 miles/yr?
For a firm with an optimal capital structure, the weighted average cost of capital (WACC) is:
You currently own a bond you purchased at par when it was issued ten years ago. The bond has a 7 percent annual coupon and matures 5 years from now. Which one of the following statements applies to this bond if the relevant market interest rate is no..
Which of the following characteristics apply to exchange-traded funds (ETFs)?
Calculate the amounts needed from each of the capital components to finance this investment.
What is the value of their cash and marketable securities?
A friend says that she expects to earn 13.50% on her portfolio with a beta of 1.50. You have two-asset portfolios including stock X and a risk-free security. The expected return of stock X is 11.50% and the beta is 1.25. The expected return on the ri..
A proposed new investment has projected sales of 650,000 variable cost are 65 percent of sales, what is the projected net income.
A 15-year mortgage has an annual interest rate of 4.9 percent and a loan amount of $170,000. (Hint: Use the "IPMT" and "PPMT" functions in Excel.) What are the interest and principal for the 48th payment?
You have a corporate (not a Treasury) bond which has a 7% coupon and pays interest on January 1 and July 1 of each year. Who is entitled to receive the interest you pay?
Given Walmart's issues with employee's, address the following questions that pertain to the major human resource management responsibilities and to change management. What one major organizational subsystem needs to be changed in the organization? Ju..
Calculate the effective annual return (EAR) fund investors got.
Diane’s Florist has fixed operating costs of $3,825, variable operating costs of $9.50 per flower arrangement, and an average selling price of $24.50 per flower arrangement. What is Diane’s Florist’s operating breakeven point in units (flower arrange..
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