Question

In: Finance

You are thinking about investing $4,692 in your​ friend's landscaping business. Even though you know the...

You are thinking about investing $4,692 in your​ friend's landscaping business. Even though you know the investment is risky and you​ can't be​ sure, you expect your investment to be worth $5,738 next year. You notice that the rate for​ one-year Treasury bills is 1%. ​However, you feel that other investments of equal risk to your​ friend's landscape business offer an expected return of 8% for the year. What should you​ do?

Solutions

Expert Solution

Present value of the return = $5,738 / (1 + 8%)^1 = $5,312.96

The present value of the return is higher than the investment.
Thus, he should investing in his friend's landscaping business.

jeff jeffy answered 2 years ago
Next > < Previous

Related Solutions

1. You are thinking about investing $4,615 in your​ friend's landscaping business. Even though you know...
1. You are thinking about investing $4,615 in your​ friend's landscaping business. Even though you know the investment is risky and you​ can't be​ sure, you expect your investment to be worth $5,640 next year. You notice that the rate for​ one-year Treasury bills is 1%. ​However, you feel that other investments of equal risk to your​ friend's landscape business offer an expected return of 9% for the year. What should you​ do? The present value of the return is...
You are thinking about investing $ 4, 970 in your? friend's landscaping business. Even though you...
You are thinking about investing $ 4, 970 in your? friend's landscaping business. Even though you know the investment is risky and you? can't be? sure, you expect your investment to be worth $ 5,700 next year. You notice that the rate for? one-year Treasury bills is 1 %. ?However, you feel that other investments of equal risk to your? friend's landscape business offer an expected return of 10 % for the year. What should you? do?
Do you know why your credit card can be refused even though you are profitable?
Do you know why your credit card can be refused even though you are profitable?
Your friend, Martinez, and you are thinking about investing in a company and are discussing the...
Your friend, Martinez, and you are thinking about investing in a company and are discussing the company’s balance sheet.  You are both very knowledgeable about the different formats of the balance sheet. You are convinced that the best format is the Unclassified Balance Sheet, but Martinez strongly believes that it is the Classified Balance Sheet. Given what you have read and our discussions in class of Chapter 5 and your prior accounting classes knowledge, give a well-reasoned and detailed argument of...
You will be graduating in two years and are thinking about your future. You know that...
You will be graduating in two years and are thinking about your future. You know that you will want to buy a house five years after you graduate and that you will want to put down $60,000. As of right now, you have $8,000 in your savings account. You are also fairly certain that once you gradu- ate, you can work in the family business and earn $32,000 a year, with a 5 percent raise every year. You plan to...
You are thinking about investing your money in the stock market. You have the following two...
You are thinking about investing your money in the stock market. You have the following two stocks in mind: stock A and stock B. You know that the economy can either go in recession or it will boom. Being an optimistic investor, you believe the likelihood of observing an economic boom is two times as high as observing an economic depression. You also know the following about your two stocks: State of the Economy RA RB Boom –2% 10% Recession...
You are thinking about investing money in the stock market and have narrowed your choices to...
You are thinking about investing money in the stock market and have narrowed your choices to one of two stocks: TD Bank or Cenovas Energy. For TD Bank you have the following statistics: •  Mean monthly closing price: $75.00      • Sample standard deviation: $6.00 The monthly closing stock prices of Cenovas Energy for the last eight months is shown below: Closing Stock Price:  ($) 14.00  14.50  11.00  13.00  13.75  11.00   8.75  10.00 Calculate the mean stock price of Cenovas Energy.  [2 marks]    Calculate the standard deviation for the sample prices...
You are thinking about investing $10 000 in a start-up and selling 1/2 of your stake...
You are thinking about investing $10 000 in a start-up and selling 1/2 of your stake at the next round of funding in 5 years and the other half - at the IPO, which is expected in 10 years. The company is expected to grow at 13% a year until its IPO date. What is the value of this investment opportunity to you today, if the risk-adjusted discount rate is 10%? (Group of answer choices) 12263.80 12515.95 11440.07 10000.00 38554.33
You are working for the CFO of a small manufacturing company and are thinking about investing...
You are working for the CFO of a small manufacturing company and are thinking about investing in new equipment. The cost of the project is 9,500 today and it pays of 15,000 in ten years. Your beta is 0.2 and the market risk premium is 5%. 1. What is the NPV of the project if the 10-year Treasury (risk-free) rate is 2.6%? 2. What is the NPV if the 10-year Treasury rate is 3.1%?
2) You are thinking about investing in stock in a company which paid a dividend of...
2) You are thinking about investing in stock in a company which paid a dividend of $10 this year and whose dividends you expect to grow at 4 percent a year. The required return is 8 percent. If the price of the stock in the market is $200 a share, should you buy it? please help me !
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT