Should exotic rental take out loan and fund all four project

Assignment Help Financial Accounting
Reference no: EM132659031

Exotic Rentals has four independent projects under consideration, each with a required rate of return of 14%. The total projects budget is $800,000. A table showing the investments and projected free cash flows follow:

Project/Year

Maserati

Lamborghini

Ferrari

BMW i8 Coupe

0 (investment)

$150,380

$221,320

$286,550

$175,500

1

$40,000

$85,000

$100,000

$52,000

2

$80,000

$110,000

$125,000

$90,000

3

$60,000

$110,000

$125,000

$90,000

4

$60,000

$92,000

$125,000

$70,000

5

$95,000

$125,000

$150,000

$135,000

No additional cash flows are expected from any of the five projects after year 5. The year 5 cash flow includes rentals and auction of the exotic vehicles into the secondary car market.

Question 1: Concluding Exotic Rentals, firm management is considering a loan to supplement the $800,000 set aside for the vehicles. The size of the loan would be approximately $34,000 and the interest rate would be 11.25%. Should Exotic Rentals take out the loan and fund all four projects? Base you decision only on the financial aspects of the deal.

[A] No

[B] Insufficient information to make a decision

[C] Yes

Reference no: EM132659031

Questions Cloud

Explain the effect of government regulation on prices : Recognize how changes in supply and demand affect market outcomes and explain the effect of government regulation on prices?
What level or levels of government have grown the fastest : Although people believe that the government has grown substantially, the government has actually undergone changes at each level. How have federal spending.
Identify the two main types of empowerment : Identify the two main types of empowerment and explain which one is used in the above case.
What three projects should the firm select : The company has sufficient capital budget to fund three out of the four projects. Assuming that they do, what three projects should the firm select?
Should exotic rental take out loan and fund all four project : The loan would be approximately $34,000 and the interest rate would be 11.25%. Should Exotic Rentals take out the loan and fund all four projects?
It project management : What is a project, and what are its main attributes? How is a project different from what most people do in their day-to-day jobs? Explain the importance
Relative effectiveness of the human resources characteristic : Using Bolman and Deal's Human Resources Frame as a lens, what are the relative effectiveness of the human resources characteristics?
What does kamp argue the american dream has come to mean : What does Kamp argue the American Dream has come to mean for many Americans today? Draw from some of the specific details he gives.
How do criminal justice professionals measure crime : How do criminal justice professionals measure crime? What are their methods? What, in your opinion, are the strengths and weaknesses of each of these methods.

Reviews

Write a Review

Financial Accounting Questions & Answers

  What is steve maximum charitable income tax deduction

Steve, Ignoring any AGI limitations, what is Steve's maximum charitable income tax deduction for this year? Please show your work.

  Technique of accounting for product

Particular technique of accounting for product and describe why you consider it to be better than the alternatives.

  Classified the lease as operating or capital

Develop two lease examples, operating and capital which includes the lease terms. State the requirements for determining whether a lease is an operating or capital lease. Provide journal entries that set up the lease and entries for payments. Show ho..

  Find what the the total return is

Find What The the total return is? Ten years after purchasing shares in a mutual fund for ?$7300?, the shares are sold for ?$11,500.

  How would the selling price of the bond be determined

How would the selling price of the bond be determined? Specify how all items related to the bonds would be presented in a balance sheet prepared Immediately after the bond issue was sold.

  Createa and give a balance sheet for pbandj corp

PB&J Corp, Based on the un-adjusted trial balance and the additional data, give a balance sheet for PB&J Corp. dated December 31, 2019

  When recording the journal entry for labor

When recording the journal entry for labor, the goods in process inventory account is.

  Is it appropriate to recognize revenue

CableCo, a customer of CoAx, has entered into a binding written agreement to purchase 1,000 feet of 18 American wire gage (AWG) coaxial cable for $3 per foot. In other words, CoAx will “virtually” segregate the inventory. CoAx and its auditors have c..

  Which asset do you recommend the corporation sell

Due to prior profitable years, Cooper is subject to the alternative minimum tax and it has $4,500,000 of positive adjustments and preferences in determining is alternative minimum taxable income. Which asset do you recommend the corporation sell? ..

  What is the expected return and standard deviation

What is the expected return and standard deviation of a portfolio composed of 20 percent of funds invested in stock D, 30 percent of funds in stock E

  Calculate the direct labor rate and efficiency

Calculate the direct labor rate, efficiency, and total spending variances for Barley Hopp. Calculate the variable overhead rate, efficiency, and total spending variances for Barley Hopp.

  Would you advise switching to this alternative plan

All of the costs ofgoods sold are variable, 50 pereent ofthe marketing and distribution costs are variable, and 40 percent ofthe administration costs are variable.

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