Question
In: Finance
You are the financial manager of a large company and you must recommend the best investment...
You are the financial manager of a large company and you must
recommend the best investment to the board of directors.
1- (30 points) If the firm wants to invest 100,000 €, which of
the following options is the most interesting one:
a) To invest in a bank account that offers an annual simple
interest rate of 7%, for 10 years
b) To invest in a bank account that offers an annual compound
interest rate of 6%, for 10 years
The bank pays interests once per year.
2- (40 points) If you decide the option of compound interest
rate, what is the total amount after 10 years if the interests are
paid: a. Semesterly
b. Quarterly c. Monthly d. Weekly
Compare the results and choose the best option for your
firm.
3- (30 points) How much money should the company invest today,
in a bank account that offers a compound monthly interest rate of
0.6%, to get the same amount than in question 1b) but in seven
years’ time?
(Im sorry can you please answer question 3 only i had to put
all the questions because they are related to each other).
Thank you
Solutions
jeff jeffy answered 1 year agoRelated Solutions
As finance manager of the company you should advise the manager about the best investment criteria...
As
finance manager of the company you should advise the manager about
the best investment criteria to use in this situation. You should
explain to the board of directors the pros and Cons of Npv method.
In addition, in the meeting one of the managers claims that we
should consider IRR for the project as well do you agree with hos
opinion? explain your answer
If you were the financial manager of this tourism company, would you authorize for new investment?...
If you were the financial manager of this tourism company, would
you authorize for new investment? What calculations might you use
to value the potential of the new investment?
What pitfalls are associated with each type of capital
budgeting: net present value, internal rate of return, and payback?
How does each type of capital budgeting, and associated pitfalls,
influence investment decisions?
The Best Manufacturing Company is considering a new investment. Financial projections for the investment are tabulated...
The Best Manufacturing Company is considering a new investment.
Financial projections for the investment are tabulated here. The
corporate tax rate is 22 percent. Assume all sales revenue is
received in cash, all operating costs and income taxes are paid in
cash, and all cash flows occur at the end of the year. All net
working capital is recovered at the end of the project.
Year 0
Year 1
Year 2
Year 3
Year 4
Investment
$
27,000
Sales revenue...
Q1. The Best Manufacturing Company is considering a new investment. Financial projections for the investment are...
Q1.
The Best Manufacturing Company is considering a new investment.
Financial projections for the investment are tabulated here. The
corporate tax rate is 22 percent. Assume all sales revenue is
received in cash, all operating costs and income taxes are paid in
cash, and all cash flows occur at the end of the year. All net
working capital is recovered at the end of the project.
Year 0
Year 1
Year 2
Year 3
Year 4
Investment
$
27,000
Sales...
The Best Manufacturing Company is considering a new investment. Financial projections for the investment are tabulated...
The Best Manufacturing Company is considering a new investment.
Financial projections for the investment are tabulated here. The
corporate tax rate is 21 percent. Assume all sales revenue is
received in cash, all operating costs and income taxes are paid in
cash, and all cash flows occur at the end of the year. All net
working capital is recovered at the end of the project.
Year 0
Year 1
Year 2
Year 3
Year 4
Investment
$
26,900
Sales revenue...
The Best Manufacturing Company is considering a new investment. Financial projections for the investment are tabulated...
The Best Manufacturing Company is considering a new investment.
Financial projections for the investment are tabulated here. The
corporate tax rate is 24 percent. Assume all sales revenue is
received in cash, all operating costs and income taxes are paid in
cash, and all cash flows occur at the end of the year. All net
working capital is recovered at the end of the project.
Year 0
Year 1
Year 2
Year 3
Year 4
Investment
$
27,200
Sales revenue...
The Best Manufacturing Company is considering a new investment. Financial projections for the investment are tabulated...
The Best Manufacturing Company is considering a new investment.
Financial projections for the investment are tabulated here. The
corporate tax rate is 40 percent. Assume all sales revenue is
received in cash, all operating costs and income taxes are paid in
cash, and all cash flows occur at the end of the year. All net
working capital is recovered at the end of the project.
Year 0
Year 1
Year 2
Year 3
Year 4
Investment
$
37,000
Sales revenue...
The Best Manufacturing Company is considering a new investment. Financial projections for the investment are tabulated...
The Best Manufacturing Company is considering a new investment.
Financial projections for the investment are tabulated here. The
corporate tax rate is 23 percent. Assume all sales revenue is
received in cash, all operating costs and income taxes are paid in
cash, and all cash flows occur at the end of the year. All net
working capital is recovered at the end of the project.
Year 0
Year 1
Year 2
Year 3
Year 4
Investment
$
26,600
Sales revenue...
The Best Manufacturing Company is considering a new investment. Financial projections for the investment are tabulated...
The Best Manufacturing Company is considering a new investment.
Financial projections for the investment are tabulated here. The
corporate tax rate is 22 percent. Assume all sales revenue is
received in cash, all operating costs and income taxes are paid in
cash, and all cash flows occur at the end of the year. All net
working capital is recovered at the end of the project. Year 0 Year
1 Year 2 Year 3 Year 4 Investment $ 27,000 Sales revenue...
The Best Manufacturing Company is considering a new investment. Financial projections for the investment are tabulated...
The Best Manufacturing Company is considering a new investment.
Financial projections for the investment are tabulated here. The
corporate tax rate is 21 percent. Assume all sales revenue is
received in cash, all operating costs and income taxes are paid in
cash, and all cash flows occur at the end of the year. All net
working capital is recovered at the end of the project.
Compute the incremental cash flows of the investment for year 0
(The last row in...
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