"A firm is considering purchasing a computer system.
-Cost of system is $112,000. The firm will pay for the computer
system in year 0.
-Project life: 5 years
-Salvage value in year 0 (constant) dollars: $23,000
-Depreciation method: five-years MACRS
-Marginal income-tax rate = 37% (remains constant over time)
-Annual revenue = $127,000 (year-0 constant dollars)
-Annual expenses (not including depreciation) = $96,000 (year-0
constant dollars)
-The general inflation rate is 3.6% during the project period
(which will affect all revenues, expenses, and the salvage value
but not depreciation).
-The firm borrows the entire $112,000 at 12% interest to be repaid
in 2 annual payments. The debt interest paid and the principal
payment SHOULD NOT be changed by the inflation rate. Lending
agencies set the interest rate of borrowing to account for the
inflation rate.
Calculate the effects of borrowing and include the debt interest
paid and the principal repayment into the income statement and cash
flow statement. Determine the INFLATION-FREE IRR' of the computer
system. Enter your answer as a percentage between 0 and 100."
In: Finance
The Toyota Camry is one of the best-selling cars in North America. The cost of a previously owned Camry depends on many factors, including the model year, mileage, and condition. To investigate the relationship between the car’s mileage and the sales price for Camrys, the following data show the mileage and sale price for 19 sales (PriceHub web site, February 24, 2012).
| Miles (1,000s) | Price ($1,000s) | ||||
| 22 | 16.2 | ||||
| 29 | 16.0 | ||||
| 36 | 13.8 | ||||
| 47 | 11.5 | ||||
| 63 | 12.5 | ||||
| 77 | 12.9 | ||||
| 73 | 11.2 | ||||
| 87 | 13.0 | ||||
| 92 | 11.8 | ||||
| 101 | 10.8 | ||||
| 110 | 8.3 | ||||
| 28 | 12.5 | ||||
| 59 | 11.1 | ||||
| 68 | 15.0 | ||||
| 68 | 12.2 | ||||
| 91 | 13.0 | ||||
| 42 | 15.6 | ||||
| 65 | 12.7 | ||||
| 110 | 8.3 | ||||
| (a) | Choose a scatter chart below with ‘Miles (1000s)’ as the independent variable. | ||||||||
|
|||||||||
| - Select your answer -Chart (i)Chart (ii)Chart (iii)Chart (iv)Item 1 | |||||||||
| What does the scatter chart indicate about the relationship between price and miles? | |||||||||
| The scatter chart indicates there may be a - Select your answer -positivenegativeItem 2 linear relationship between miles and price. Since a Camry with higher miles will generally sell for a lower price, a negative relationship is expected between these two variables. This scatter chart is consistent with what is expected. | |||||||||
| (b) | Develop an estimated regression equation showing how price is related to miles. What is the estimated regression model? | ||||||||
| Let x represent the miles. | |||||||||
| If required, round your answers to four decimal places. For subtractive or negative numbers use a minus sign even if there is a + sign before the blank. (Example: -300) | |||||||||
| = + x | |||||||||
| (c) | Test whether each of the regression parameters β0 and β1 is equal to zero at a 0.01 level of significance. What are the correct interpretations of the estimated regression parameters? Are these interpretations reasonable? | ||||||||
| The input in the box below will not be graded, but may be reviewed and considered by your instructor. | |||||||||
| (d) | How much of the variation in the sample values of price does the model estimated in part (b) explain? | ||||||||
| If required, round your answer to two decimal places. | |||||||||
| % | |||||||||
| (e) | For the model estimated in part (b), calculate the predicted price and residual for each automobile in the data. Identify the two automobiles that were the biggest bargains. | ||||||||
| If required, round your answer to the nearest whole number. | |||||||||
|
The best bargain is the Camry # in the data set, which has miles, and sells for $ less than its predicted price. The second best bargain is the Camry # in the data set, which has miles, and sells for $ less than its predicted price. |
|||||||||
| (f) | Suppose that you are considering purchasing a previously owned Camry that has been driven 70,000 miles. Use the estimated regression equation developed in part (b) to predict the price for this car. | ||||||||
| If required, round your answer to one decimal place. Do not round intermediate calculations. | |||||||||
| Predicted price: $ | |||||||||
| Is this the price you would offer the seller? | |||||||||
| - Select your answer -YesNoItem 14 | |||||||||
| Explain. | |||||||||
| The input in the box below will not be graded, but may be reviewed and considered by your instructor. |
In: Statistics and Probability
1. What is something that you can do to reduce a cost of globalization or to spread the benefits to others? What is something that you think the United States or other developed, first world nations can do to reduce the risks of globalization and spread its benefits?
In: Economics
An investment carrying a current cost of $130,000 is going to generate $70,000 of revenue in each of the next three years. To calculate the internal rate of return we need to:
options:
calculate the present value of each of the $70,000 payments and multiply these and set this equal to $130,000.
take the present value of $210,000 for three years from now and set this equal to $130,000.
set the sum of the present value of $70,000 for each of the next three years equal to $130,000.
subtract $130,000 from $210,000 and set this difference equal to the interest rate.
In: Finance
A few years ago, it cost millions of dollars to outfit a store the size of a 7-Eleven with cameras and a high-performance computer server for cashierless technology. Now, it costs anywhere from $100,000 to $300,000 to outfit the same size store, depending on how many cameras and the type of hardware used. Based on this information, how quickly will cashierless technology diffuse?
In: Economics
QUESTION 1
Equipment with a cost of $75,809.00, an estimated residual value of $4,582.00, and an estimated life of 13 years was depreciated by the straight-line method for 4 years. Due to obsolescence, it was determined that the remaining useful life should be shortened by 3 years and the residual value changed to zero. The depreciation expense for the current and future years is
QUESTION 2
The Boxwood Company sells blankets for $ 37.00 each. The following was taken from the inventory records during May. The company had no beginning inventory on May 1.
| Date | Blankets | Units | Cost |
| May 03 | Purchase | 8 | $15.00 |
| May 10 | Sale | 4 | |
| May 17 | Purchase | 14 | $18.00 |
| May 20 | Sale | 5 | |
| May 23 | Sale | 3 | |
| May 30 | Purchase | 10 | $20.00 |
Assuming that the company uses the perpetual inventory system, determine the ending inventory value for the month of May using the FIFO inventory cost method.
QUESTION 3
On June 8, Alton Co. issued an $86,600, 7%, 120-day note payable to Seller Co. Assume that the fiscal year of Seller Co. ends June 30. Using a 360-day year in your calculations, what is the amount of interest revenue recognized by Seller in the following year? When required, round your answer to the nearest dollar.
In: Accounting
In: Economics
What is the NPV for a project whose cost of capital is 15 percent and initial after-tax cost is $5,000,000 and is expected to provide after-tax operating cash inflows of $1,800,000 in year 1, $1,900,000 in year 2, $1,700,000 in year 3, and $1,300,000 in year 4?
Group of answer choices
a) $1 700,000
b) 371,764
c) -4,862,947
d) -137,053
In: Finance
What is the cost of capital for bank overdraft (kbo). The overdraft rate is 5.1 % pa compounded 12 times a year? Answer as a percentage to two decimal places (2.12% should be entered as 2.14)
In: Finance
explain the pros and cons of the ROR price ceiling in comparison to an average cost price ceiling. Write a short
paragraph of about 1/3 of a page in order to explain.
In: Economics