Question
In: Finance
You are interested in investing in a new business in 5 years time that has a...
You are interested in investing in a new business in 5 years time that has a total cost of $10 million. The schedule of payments for the business comprise; $500 000 today, $2 million at the end of year 2 and the remainder at the end of year 5.
To pay for the new business you have access to the following savings; $3.8 million today and $3 million in 3 years time. On any savings you can earn 10% p.a. compounded half-yearly in an account with the Wacpac Bank. You want to pay for any shortfall in savings for the investment by depositing an equal annual end of year amount into the Wacpac Bank account over the next 5 years.
Required:
(1) What is the approximate effective interest rate earned on your savings?
(2) What is the approximate present value today of the total payments required for the new business?
(3) What is the approximate annual end of year amount required to meet the new business schedule of payments?
Solutions
jeff jeffy answered 2 years agoRelated Solutions
You are interested in investing in a new business in 5 years time that has a...
You are interested in investing in a new business in 5 years
time that has a total cost of $10 million. The schedule of payments
for the business comprise; $500 000 today, $2 million at the end of
year 2 and the remainder at the end of year 5.
To pay for the new business you have access to the following
savings; $3.8 million today and $3 million in 3 years time. On any
savings you can earn 10% p.a....
You are interested in investing in a building costing £500,000 for a period of three years....
You are interested in investing in a building costing £500,000
for a period of three years. You can either rent out the building
as is (Option A) or install an assortment of energy-efficient
fittings at an additional cost of £20,000 (Option B). Regardless of
the option chosen, assume that a tenant takes immediate occupation,
paying an annual rent in arrears. Maintenance expenses and the sale
of the building also take place at the end of the year.
Option A
Option...
Think of a business you may be interested in starting and take the time to address...
Think of a business you may be interested in starting and take
the time to address the following questions in detail (please
include the question numbers below when you answer each
question):
1. What kind of resources would you need to acquire to operate this
business?
2. Which costs are implicit costs?
3. Which resources are fixed and which are variable?
4. Explain the difference between fixed and variable costs for this
business.
5. Explain how this business could experience...
Think of a business you may be interested in starting and take the time to address...
Think of a business you may be interested in starting and take
the time to address the following questions in detail (please
include the question numbers below when you answer each question):
1. What kind of resources would you need to acquire to operate this
business? 2. Which costs are implicit costs? 3. Which resources are
fixed and which are variable? 4. Explain the difference between
fixed and variable costs for this business. 5. Explain how this
business could experience...
KFA is considering investing in a new drone technology costing $12 million. It has a 5...
KFA is considering investing in a new drone technology costing
$12 million. It has a 5 year life (no salvage value) and will save
KFA $3.5 million/year in pre-tax operating costs. It will need an
up-front working capital investment of $300,000. KFA's cost of
capital is 8.0% and its tax rate is 21.0%. Their current technology
has a $5 million book value but a $1 million salvage value. What
are the NPV and IRR of the decision to replace the...
KFA is considering investing in a new drone technology costing $12 million. It has a 5...
KFA is considering investing in a new drone technology costing
$12 million. It has a 5 year life (no salvage value) and will save
KFA $3.5 million/year in pre-tax operating costs. It will need an
up-front working capital investment of $300,000. KFA's cost of
capital is 8.0% and its tax rate is 21.0%. Their current technology
has a $5 million book value but a $1 million salvage value. What
are the NPV and IRR of the decision to replace the...
Show Work, Please. Excel Preferably. Suppose you are considering investing in a new business that will...
Show Work, Please. Excel Preferably. Suppose you are considering
investing in a new business that will cost $10 million. A bank is
willing to lend you $7 million for the purchase with equity holders
having to provide the remainder of the funds. the terms of the loan
are: a 20-year loan with yearly payments at a fixed rate of 3%. You
will sell the business after year 8. You estimate the business will
have the following profits in years 1-8:...
Mona has started a new business and is interested in increasing equity. Discuss some ways in...
Mona has started a new business and is interested in increasing
equity. Discuss some ways in which she can achieve this goal. Be
specific!
You are investing $20,000 for 40 years at 5% annual compounded interest. Fill out a table that...
You are investing $20,000 for 40 years at 5% annual compounded
interest. Fill out a table that shows the future value
of your investment using various intervals of
compounding: annual, quarterly, monthly,
daily. Your work should be represented in the following
table. Use normal rounding conventions and appropriate
units.
COMPOUNDING INTERVAL
ANNUALLY
QUARTERLY
MONTHLY
DAILY
FORMULA USED
FUTURE VALUE
5. A new young mother has opened a cloth diaper service. She is interested in...
5. A new young mother has opened a cloth diaper
service. She is interested in simulating the number of diapers
required for a one-year- old. She hopes to use this data to show
the cost effectiveness of cloth diapers. The table below shows the
number of diapers demanded daily and the cumulative probabilities
associated with each level of demand.
Daily Demand
Cumulative Probability
Interval of
Random Numbers
5
0.30
01-30
6
0.80
...
ADVERTISEMENT
ADVERTISEMENT
Latest Questions
- The equivalent synchronous impedance of a 25kVA, 400V three-phase Y-connected synchronous generator is 0.05 + j1.6...
- You have $100,000 to invest in either Stock D, Stock F, or a risk-free asset. You...
- In two or three sentences, explain how you have seen the concept of grit work in...
- You have invested 30 percent of your portfolio in Jacob, Inc., 40 percent is Bella Co.,...
- Parallel Arrays This question is in MindTap Cengage Summary In this lab, you use what you...
- 5. You have invested 30 percent of your portfolio in Jacob, Inc., 40 percent is Bella...
- JAVA Write a test program that prompts the user to enter a series of integers and...
ADVERTISEMENT