Question
In: Finance
Tyler is trying to decide between two mobile phone carriers. Carrier A requires him to pay...
Tyler is trying to decide between two mobile phone carriers. Carrier A requires him to pay $300 for the phone and monthly charges of $70 for 24 months. Carrier B wants him to pay $200 for the phone and monthly charges of $90 for 12 months. Assume he will keep replacing the phone after his contract expires. His cost of capital is 6 % annually. Based on cost alone, which carrier should he choose?
a) The equivalent monthly cost for Carrier A is ------.
b) The equivalent monthly cost for Carrier B is------.
c) Tyler should choose Carrier A or Carrier B
Solutions
jeff jeffy answered 1 year agoRelated Solutions
Tyler is trying to decide between two mobile phone carriers. Carrier A requires him to pay...
Tyler is trying to decide between two mobile phone carriers.
Carrier A requires him to pay ?$500 for the phone and monthly
charges of ?$70 for 36 months. Carrier B wants him to pay ?$300 for
the phone and monthly charges of $80 for 30 months. Assume he will
keep replacing the phone after his contract expires. His cost of
capital is 55?%. Based on cost? alone, which carrier should he
?choose? What are the equivalent monthly cost for both...
You are trying to decide between two mobile phone carriers. Carrier A requires you to pay...
You are trying to decide between two mobile phone carriers.
Carrier A requires you
to pay $200 for the phone and monthly charges of $60 for 24
months. Carrier B wants
you to pay $100 for the phone and monthly charges of $70 for 12
months. Assume you
will keep replacing the phone after your contract expires. Your
cost of capital is 4%.
Based on cost alone, which carrier should you choose?
You are trying to decide between two mobile phone carriers. Carrier A requires you to pay...
You
are trying to decide between two mobile phone carriers. Carrier A
requires you to pay $200 for the phone and monthly charges of $60
for 24 months. Carrier B wants you to pay $100 for the phone and
monthly charges of $70 for 12 months. Assume you will keep
replacing the phone after your contract expires. Your cost of
capital is 4%. Based on costs alone, which carrier should you
choose?
7) You are trying to decide between two mobile phone carriers. Carrier A requires you to...
7) You are trying to decide between two mobile phone carriers.
Carrier A requires you to pay $200 for the phone and monthly
charges of $60 for 24 months. Carrier B wants you to pay $100 for
the phone and monthly charges of $70 for 12 months. Assume you will
keep replacing the phone after your contract expires. Your cost of
capital is 3% APR, compounded monthly.
Dunning, Inc. is trying to decide between two investment projects using NPV. Project A requires an...
Dunning, Inc. is trying to decide between two investment
projects using NPV. Project A requires an initial investment of
$600,000 and has annual cash inflows of $196,000 for the next 5
years. Project B has an initial investment of $400,000 and offers
annual cash inflows of $88,000 over the next 7 years. Dunning, Inc.
uses a 6% discount rate to evaluate investment projects.
a) Calculate the NPV for both projects and determine which
investment Dunning should choose.
Oppu is trying to design and launch a new mobile phone to the market. The average...
Oppu is trying to design and launch a new mobile phone to the
market. The average selling price of competitors’ phones is $1,200
per handset. Oppu believes that consumers will be willing to buy
the new phone at 10 percent below the market price. However, after
getting the quotation from its Supplier X, Oppu still faces a cost
gap of $200 as it has planned to make a 15% percent profit for the
new product.
(a) Based on the given...
The manager in a canned food processing plant is trying to decide between two labeling machines....
The manager in a canned food processing plant is trying to
decide between two labeling machines.
Machine A
Machine B
First Cost
$15,000
$25,000
Maintenance and operating costs
1,600
400
Annual benefit
8,000
13,000
Salvage value
3,000
6,000
Useful life, in years
6
10
a) Assume an interest rate of 6%.
slove using annual worth to determine which machine should be
chosen.
b) Solve using Internal Rate of
Return
You are trying to decide between two investments. The first investment has a 90% chance to...
You are trying to decide between two investments. The first
investment has a 90% chance to make you $2,000, but the alternative
is that you could be losing $5,000. The second investment has a 15%
chance to make you $25,000, but the alternative is that you could
be losing $5,000. Use expected value to help decide which
investment is the mathematically smart choice. (Hint: make two
separate expected values and compare).
a) Indigo Inc. has $581,180 to invest. The company is trying to decide between two alternative...
a) Indigo Inc. has $581,180 to invest. The company is trying to
decide between two alternative uses of the funds. One alternative
provides $77,120 at the end of each year for 12 years, and the
other is to receive a single lump-sum payment of $1,823,990 at the
end of the 12 years. Which alternative should Indigo select? Assume
the interest rate is constant over the entire investment.
b) Indigo Inc. has completed the purchase of new Dell computers.
The fair...
A company is trying to decide between TWO projects that would provide the same necessary service...
A company is trying to
decide between TWO projects that would provide the same necessary
service and each project can be repeated indefinitely at the same
cost and same cash flows.
The first project
costs $7,000 and is expected to generate cash flows of $4,250 for
NINE years.
The second project
cost $10,000 and is expected to generate cash flows of $4,400 for
ELEVEN years
While the replacement
chain approach is a valid option, you currently cannot use a
spreadsheet...
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