An auto dealership is advertising that a new car with a sticker price of $34,128 is on sale for $25,995 if payment is made in full, or it can be financed at 0% interest for 72 months with a monthly payment of $474. Note that 72 payments × $474 per payment = $34,128, which is the sticker price of the car. By allowing you to pay for the car in a series of payments (starting one month from now) rather than $25,995 now, the dealer is effectively loaning you $25,995. If you choose the 0% financing option, what is the effective interest rate that the auto dealership is earning on your loan? (Hint: Discount the payments back to current dollars, and use Goal Seek to find the discount rate that makes the net present value of the payments = $25,995.)

Enter your answer as a percentage. If required, round your answer to one decimal digit.

1. The Lathe

You are considering the purchase of a new lathe to expand production of a hot product line. The lathe costs $280. It will have a life of four years. You will depreciate the lathe to zero book value using straight-line depreciation over four years. At the end of four years, you will sell the machine for $50. The new lathe will generate cash sales of $230 per year, and operating costs will run $120 per year. The firm will need to carry additional inventory of $30, accounts receivable of $30, and cash balances of $10. There is no material impact on accounts payable. The corporate tax rate is 40%. Assume the additional working capital requirements are incurred at the start of the project (t = 0) and are recovered in Year 4. The discount rate is 8%.

Assume all cash flows last for four years.

1. Use a table similar to the following to estimate the total cash flows from the project.

2. Assume the cash flows from (A) are the following:

What are the NPV and IRR for the project? (Show calculations to receive full credit.) Should you invest in the project?

With the ACA, there is a new way the hospitals are paid. It is called Value-Based Purchasing (VBP).
do you feel that the government's new value-based purchasing will work? Please explain your answer.

They decide to shop for furnishings for the new house. They choose items that amount to $3600.00. The store has 2 fixed installment loan options for purchasing: Option 1: 20% down payment and financing at 6% simple interest per year for 3 years. Option 2: no down payment and financing at 6.35% simple interest for 4 years. Answer each of the following questions separately, showing all your work to reach each answer.

A. Which option will result in smaller total finance charge? What will that total finance charge be?

B. Which option will result in the smaller monthly payment? What will that monthly payment be?

C. They decide to defer any purchases and invest a $3600 bonus that Maria will be getting from work in a savings account. The interest rate is 1.6% compounded every month. How much interest will they earn in 3 years?

D. They decide to defer any purchases and loan the $3600 bonus to a needy relative at 2.5% simple interest per year. How long will the term of the loan need to be if they want to earn $400 in interest (assuming the loan is not paid off early).

NPV and maximum return   

A firm can purchase new equipment for a ​$150,000 initial investment. The equipment generates an annual​ after-tax cash inflow of ​$44,400 for 4 years.

a. Determine the net present value

​ (NPV​)

of the​ asset, assuming that the firm has a cost of capital of

10​%.

Is the project​ acceptable?

b. Determine the maximum required rate of return that the firm can have and still accept the asset.

The following data relate to KATZEN Sales Inc., a new company:

Required: A. Determine the number of units in the ending finished-goods inventory B. Calculate the cost of the ending finished-goods inventory using variable costing C. Calculate the cost of the ending finished-goods inventory using absorption costing D The difference between net income using variable costing & absorption costing is _______ E. Determine the company's variable-costing net income. G. Determine the company's absorption-costing net income. H. Explain the difference in net income amounts. Support your explanation with a reconciliation.

A new computer system will require an initial outlay of $20,000, but it will increase the firm’s cash flows by $4,300 a year for each of the next 8 years.

a. Calculate the NPV and decide if the system is worth installing if the required rate of return is 9%. (Negative amount should be indicated by a minus sign. Do not round intermediate calculations. Round your answers to 2 decimal places.)

b. Calculate the NPV and decide if the system is worth installing if the required rate of return is 14%. (Negative amount should be indicated by a minus sign. Do not round intermediate calculations. Round your answers to 2 decimal places.)

c. How high can the discount rate be before you would reject the project? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)