3 Factors that Influence Rate of Return Any bondholder‚ or any investor for that matter‚ will allow three factors to influence his or her required rate of return. The three factors are the following: real (pure) rate of return‚ inflation‚ and risk premium. These three factors equal the risk free rate which is the rate of return of an investment with no risk of financial loss. This is also the rate that investors would expect from an absolutely risk-free investment over a period of time.
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LINEAR PROGRAMMING FORMULATION PROBLEMS AND SOLUTIONS 7-14 The Electrocomp Corporation manufactures two electrical products: air conditioners and large fans. The assembly process for each is similar in that both require a certain amount of wiring and drilling. Each air conditioner takes 3 hours of wiring and 2 hours of drilling. Each fan must go through 2 hours of wiring and 1 hour of drilling. During the next production period‚ 240 hours of wiring time are available and up to 140 hours of drilling
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000 | -$2‚000‚000 | 1 | 500‚000 | | 2 | 500‚000 | | 3 | 500‚000 | | 4 | 500‚000 | | 5 | 500‚000 | | 6 | 500‚000 | | 7 | 500‚000 | 5‚650‚000 | a. Compute the NPV and IRR for the above two projects‚ assuming a 13% required rate of return. b. Discuss the ranking conflict. c. What decision should be made regarding these two projects? Answer: a. NPV of A = $211‚305 NPV of B = $401‚592.64 IRR of A = 16.33% IRR of B = 15.99% b. The later cash flow of B causes
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things. a . O ne‚ do you think thin - slab casting will be a profitable i nvestment? There is a spreadsheet available for download along w ith this project that will help you m ake a n a ss essm ent. This s preadsheet calculates the internal rate of return (IRR) of the new p roject using cash flow projections. The projections are based on a ssum ptions detailed in the notes below the m ain spr eadsheet. O nce you download t he spreadsheet‚ you can exp erim ent with d ifferent
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building from Frank Thomas to produce his required 15% after-tax return? In order for Frank Thomas to earn his 15% after tax return‚ Harmonic must buyback the building for just over $11M. The calculations can be seen in the chart below. 3) What proportion of the terminal value must be distributed to Comet Capital to produce its required 25% before-tax rate of return? In order for Comet Capital to produce its 25% before tax return‚ they must receive about $73.5M terminal value. This amount
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The social rate of return to education looks at the positive externalities of schooling‚ e.g. faster innovation‚ enhanced productivity‚ and the accrued benefits for the entire community. To give an estimation of its magnitude‚ social costs and social gains of education must be considered. Costs comprise the public spending destined to education‚ that usually represents one of the top three public expenditure recipients. The benefits are the sum of the private returns for each citizen and the benefits
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extend the learning beyond the textbook. Sometimes a movie can really help students get a feel for an era or an event. Films help contextualize the way people of the time dressed‚ spoke‚ acted‚ and also showed any form of racism. For example‚ in The Return of Martin Guerre‚ the clothing of the time is accurately portrayed and it helped the viewer to realize the era and time period.
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the Honor Pledge: I have neither given nor received any aid on this examination.________________ HELPFUL FORMULAS ‚ ‚ ‚ ‚ 1 ‚ 1 ‚ ‚ 1 1 ‚ ‚ ‚ ‚ 1 1 ‚ 1 1 1 1 1 1 1 2 ‚ 1. Given an interest rate of 7.3 percent per year‚ what is the value at date t = 7 of a perpetual stream of $2‚100 annual payments that begins at date t = 15? 2100 0.073 1 1.073 17‚567.03 2. You’ve just joined the investment banking firm of Dewey‚ Cheatum‚ Howe
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Advantages and disadvantages of Historical Cost accounting Historical cost accounting has been a controversial method that experienced many criticisms over a period of time‚ especially since it considers the acquisition cost of an asset and does not recognize the current market value. Merits and demerits of this method are as follows. The most obvious advantage of HC accounting is objectivity. It is a predominantly objective system‚ which records the original cost of an item when it was purchased
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What are the advantages and disadvantages of principles-based accounting? Perhaps the primary benefit of principles-based accounting rests in its broad guidelines that can be applied to numerous situations. Broad principles avoid the pitfalls associated with precise requirements that allow contracts to be written specifically to manipulate their intent. A 1981 study sponsored by FASB found evidence that managers purposefully try to structure leases as operating leases to avoid incurring additional
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