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Nancy’s Notions pays a delivery firm to distribute its products in the metro area. Delivery costs are $32,000 per year. Nancy can buy a used truck for $8,000 that will be adequate for the next 5 years. Operating and maintenance costs are estimated to be $22,000 per year. At the end of 5 years, the used truck will have an estimated salvage value of $5,000. Nancy’s MARR is 22%/year.
What is the present worth of this investment? $
Round entry to two decimal places. The tolerance is ±5.
What is the decision rule for judging the attractiveness of investments based on present worth?
Should Nancy buy the truck?
Grand Adventure Properties offers a 9.5 percent coupon bond with annual payments. The yield to maturity is 10.9 percent and the maturity date is 11 years from today. What is the market price of this bond if the face value is $1,000?
Tax shields are used to increase cash flow. How does a tax shield operate in setting up an after tax cash flow analysis? Be as specific as possible and provide examples. Be sure to cite any resources used.
Larry qualifies for a home office deduction. The amount of space devoted to the business is 500 square feet of the total 2000 square feet in his house. Larry's total rent on the house is $7000, and he pays tilities (other than telephone) of $4500 for..
A contractor has purchased a piece of equipment for $150,000 and expects to use it 1,000 hrs per year for 10 years. The salvage value is $8,000 after 10 years. A single major repair of $20,000 is expected at the end of the 5th year. With an interest ..
Form a portfolio of three shares of stock and five puts. What is the (nonrandom) payoff to this portfolio? What is the present value of the portfolio?
What are the three major functions (DECISION AREAS) of the financial manager? How are they related?
You need to save $50,000 in 10 years from today. You want to make annual payments at the end of each year into a sinking fund that will earn interest at an annual rate of 10 percent. What will the annual payments have to be? What will the monthly pay..
Consider the following spot interest rates for maturities of one, two, three, and four years. r1 = 4.1% r2 = 4.5% r3 = 5.2% r4 = 6.0% Assuming a constant real interest rate of 2 percent, what are the approximate expected inflation rates for the next ..
Nuevo Company produces a single product. Determine the fixed overhead spending variance. Determine the variable overhead spending variance.
Which of the following combinations is assured to decrease the interest rate sensitivity of a bond?
Caan Corporation will pay a quarterly dividend of $3.00 per share next quarter. how much will you pay for the company’s stock today?
Describe resources/capabilities that the company possesses. Analyze each of these with regard to the VRIO framework: Justify your response. Is it rare? Justify. Is it difficult (for competitors) to imitate? Justify. Is the company able to exploit it?..
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