n December ​, General Electric​ (GE) had a book value of equity of ​billion, billion shares​ outstanding, and a market price of per share. GE also had cash of ​billion, and total debt of billion. a. What was​ GE's market​ capitalization? What was​ GE's market-to-book​ ratio? b. What was​ GE's book​ debt-equity ratio? What was​ GE's market​ debt-equity ratio? c. What was​ GE's enterprise​ value?

Answers

Answer 1

Answer:

a. GE's market capitalization = 276.60 billion; and GE's market-to-book ratio = 2.85.

b. GE's book debt-equity ratio = 2.08; and GE's market debt-equity ratio = 0.73

c. GE's enterprise value = $374.26 billion

Explanation:

Note: This question is not complete as all its data are omitted. The complete question is therefore provided before answering the question as follows:

In December 2015, General Electric (GE) had a book value of equity of $97.1 billion, 9.2 billion shares outstanding, and a market price of $30.06 per share. GE also had cash of $103.9 billion, and total debt of $201.7 billion. a. What was GE's market capitalization? What was GE's market-to-book ratio? b. What was GE's book debt-equity ratio? What was GE's market debt-equity ratio? c. What was GE's enterprise value?

The explanation to the answer is now provided as follows:

a. What was​ GE's market​ capitalization? What was​ GE's market-to-book​ ratio?

Calculation of GE's market​ capitalization

Market​ capitalization = Number of shares outstanding * market price per share = 9.2 billion * $30.06 = 276.60 billion

Calculation of GE's market-to-book​ ratio

Market-to-book​ ratio = Market capitalization / Book value of equity = $276.552 billion / $97.1 billion = 2.85

b. What was GE's book debt-equity ratio? What was GE's market debt-equity ratio?

Calculation of GE's book debt-equity ratio?

Book debt-equity ratio = Total debt / Book value of equity = $201.7 billion / $97.1 billion = 2.08

Calculation of GE's market debt-equity ratio

Market debt equity ratio = Total debt / Market​ capitalization = $201.7 billion / $276.46 billion = 0.73

c. What was GE's enterprise value?

Enterprise value = Market capitalization + Total debt - cash = $276.46 billion + $201.7 billion - $103.9 billion = $374.26 billion


Related Questions

The responsiveness of the organization as a whole to stakeholder intelligence consists of the initiatives that the firm adopts to ensure that it abides by or exceeds stakeholder expectations and has a positive impact on _____________ issues.

Answers

Answer:

Serious

Explanation:

Why Uber in Istanbul is costlier than a cab

Answers

Uber enjoys a powerful advantage in Istanbul, since its drivers do not have to acquire extortionately expensive cab licences.

ABC Inc has captured the market for school glue. It is preferred by both students and parents alike. It takes very little capitalization to enter the market but nobody successfully does. The glue clearly needs no patents or secret formulas. This type of market is called: pure or perfect competition. asymmetric oligopoly. competitive monopoly. None of the above described the appropriate market structure in this case

Answers

Answer:

None of the above described the appropriate market structure in this case

Explanation:

The market is an example of a monopolistic competition

A monopolistic competition is when there are many firms selling differentiated products in an industry. A monopoly has characteristics of both a monopoly and a perfect competition. the demand curve is downward sloping. it sets the price for its goods and services

A monopoly is when there is only one firm operating in an industry. there are usually high barriers to entry of firms. the demand curve is downward sloping. it sets the price for its goods and services.

A perfect competition is characterized by many buyers and sellers of homogenous goods and services. Market prices are set by the forces of demand and supply. There are no barriers to entry or exit of firms into the industry

An Oligopoly is when there are few large firms operating in an industry

Mike and Mary Jane Lee have a yearly income of ​$ and own a house worth ​$​, two cars worth a total of and furniture worth ​$. The house has a mortgage of ​$ and the cars have outstanding loans of ​$ each. Utility​ bills, totaling ​$ for this​ month, have not been paid. Calculate the debt ratio for the Lee household.

Answers

Answer:

48.11%

Explanation:

Calculation for the debt ratio for the Lee household.

First step is to know the Total assets

ASSETS:

House Worth 79,352

Two Cars Worth 19,907

Furniture Worth 10,442

Total Assets =$132,449

Second step is to know the Liabilities

LIABILITIES:

Mortgage Due 58,347

Car Loan Balance 5134

(2,567 each×2)

Utility Bills 242

Total liabilities =63,723

Now let calculate for the Debt debt ratio for the Lee household using this formula

Debt debt ratio=Total liabilities/Total Assets

Let plug in the formula

Debt debt ratio=63,723 /132,449

Debt debt ratio = 0.4811×100

Debt debt ratio = 48.11%

Therefore for Debt debt ratio for the Lee household will be 48.11%

Prices of existing bonds move _________ as market interest rates move _________.
a) down, down
b) up, down
c) Bond prices don't move as market interest rates move.

Answers

Answer:

The answer is B.

Explanation:

Bonds prices and market interest rates are negatively correlated i.e if the market interest rate(yield-to-maturity) of a bond goes up, the price of the bond goes down and if the yield-to-maturity(interest rate) rate goes down, the price of the bond goes up.

Usually, bonds with high interest rate are riskier than bonds with low interest rate.

All the following will help you to identify suspicious sales of high-risk products in your inventory, EXCEPT FOR: A. Taking part in relevant training programs within your establishment. B. Becoming familiar with the traditional uses and sales patterns for high-risk products. C. Participating in partnership activities with law enforcement in your community. D. Identifying purchasers who have numerous questions about specific high-risk products.

Answers

Answer:

C. Participating in partnership activities with law enforcement in your community.

Explanation:

This is because, participation in partnership activities with law enforcement has no way of helping you to identify whether a product is a high-risk product or not. It could simply be a way of trying to sensitize the community on the need for something.

On January 10 of the current year, Mary transfer to Green Corporation a machine purchased three years ago for $100,000. On the transfer date, the machine has a $60,000 adjusted basis and a $10,000 FMV. Mary receives all 100 shares of Green stock, worth $100,000, and a two-year Green note worth $10,000. Required:a. What are the amount and character of Mary's recognized gain or loss? b. What is Mary's basis in the stock and note? When does her holding period begin? c. What are the amount and character of Green's gain or loss? d. What is Green's basis in the machine? When does Green's holding period begin?

Answers

Answer:

First of all, I believe that their is a mistake on the question, since the FMV of the machine should be $100,000, not $10,000, or else it wouldn't make much sense.

a. What are the amount and character of Mary's recognized gain or loss?

ordinary income of $10,000

The two year note is considered boot and therefore, Mary must report it as ordinary income.

b. What is Mary's basis in the stock and note? When does her holding period begin?

Mary's basis in the stock is $60,000 (the basis of the machine), and $0 for the note (recognized as ordinary income). Her holding period began three years ago when the machine was purchased.

c. What are the amount and character of Green's gain or loss?

Under a carryover basis limit rule (for a section 351 exchange), Green Corporation's basis is reduced, but it not considered a loss or a gain. The basis of the exchanged stock must equal the carryover basis of the property given in exchange.  

d. What is Green's basis in the machine? When does Green's holding period begin?

Same as Mary's, the basis is $60,000 and the holding period is 3 years. Since Mary owns 100% of Green Corporation as a result of the exchange, her basis and the corporation's basis will be the same.

Our newly constructed retail space is projected to need a face lift in 7 years to keep up with changing tastes. Our projections are that the cost will be $2.5 mil. If we set aside a reserve for replacement our best return prospects for a safe investment (i.e. little risk to principle) suggest a 3% annual interest rate. How much should we deposit annually into that reserve account (sinking fund problem)

Answers

Answer:

Annual deposit = $326,265.88  

Explanation:

The amount to be set aside annually to accumulate $2.5 million in 7 years time ca n be worked out using the future value of an ordinary annuity formula.

The formula is given as follows:

FV = A×( (1+r)^n - 1)/r).

A= FV/ ((1+r)^n - 1)/r

FV - Future value

A- annual deposit

n- number of years

r- rate of return

FV - $2.5 million

A- ?

n- 7

A=2,500,000 ÷ (1.03^7 - 1)/0.03 =  326,265.88  

Annual deposit = $326,265.88  

You invested $4,500 in a project which gave you a return of 12.5% the 1st year. You were quite happy, but the 2nd year wasn't as good. You lost 3.3% that year. The 3rd year was better - you made 5.5% on this investment. What was your annual average rate of return over the three years

Answers

Answer:

4.9%

Explanation:

The computation of the annual average rate of return over the three years is shown below:

Given that

Positive return in 1st year is 12.5%

The Negative return in 2nd year is 3.3%

And, the positive return in 3rd year is 5.5%

So, the annual average rate of return is

= (12.5% - 3.3% + 5.5%) ÷ (3 years)

= 4.9%

Write a Preliminary Investigation Report for the New Century Clinic (not Personal Trainer) case study in the book at the end of chapters 1 and 2. It should be similar to the one in the book written for the Software Case on page 96. Read the Software Case at the end of chapters 1, and 2. Chapter 2 lists the topics that should be included in the PI Report. I have attached a file of interviews with various personnel in the New Century Clinic. Try to come up with the costs like in the sample, even with the limited experience you have in this. This should be about one page long, just like in the sample. Use the same headings as in the sample. This is one report, not one for chapter one and one for chapter two

Answers

Answer:

I don't see the question all I see is your whole assignment directsions

Common arguments against corporate social responsibility argue that: Select one: a. CSR detracts from the fundamental economic role of businesses. b. CSR does not achieve a triple bottom line. c. there is no positive relationship between CSR and shareholder returns. d. there are no financial benefits of social or environmental initiatives.

Answers

Answer: CSR detracts from the fundamental economic role of businesses.

Explanation:

Corporate social responsibility simply refers to the responsibility of businesses to their environment. This maybe in the form of employment opportunities, scholarships, provision of infrastructure etc.

Common arguments against corporate social responsibility argue that CSR detracts from the fundamental economic role of businesses. Critics believe the main role of business is to make profit and CSR detracts from that.

5. Which is an external users of accounting?
a. shareholders
b. prospective investors
c. managers
d. None of the above.

Answers

Answer:

Its b (prospective investors)

Yasmin Co. can further process Product B to produce Product C. Product B is currently selling for $34 per pound and costs $26 per pound to produce. Product C would sell for $57 per pound and would require an additional cost of $22 per pound to produce. What is the differential cost of producing Product C

Answers

Answer:

Differential cost of producing product C is $22

Explanation:

Total cost of product C = Cost of product B + Additional cost to produce C

= $26 + $22

= $48

Differential Cost = Total cost to produce C - Cost of producing B

= $48 - $26

=   $22

Thus, the differential cost of producing product C is $22

enkins Company had the following information for the year: Direct materials used $ 301,100 Direct labor incurred (9,300 hours) $ 252,600 Actual manufacturing overhead incurred $ 420,000 Jenkins Company used a predetermined overhead rate using estimated overhead of $368,000 and 8,000 estimated direct labor hours. Assume the only inventory balance is an ending Finished Goods Inventory balance of $19,700. What was adjusted cost of goods sold

Answers

Answer:

The adjusted cost of goods sold is $86,710

Explanation:

The actual cost of production incurred = Direct materials used + Direct labor incurred + Actual manufacturing overhead incurred

= $301,100 + $252,600 + $420,000

= $973,100

Actual costs of goods sold = $973,100 - $19,700

= $953,400

Direct labor cost per hour = $252,600 / 9,300 hours

= $27.16 per hour

Estimated direct labor cost = $252,600 / 9,300 × 8,000

= $217,290

Total estimated cost of production = $301,100 + $217,290 + $368,000

= $886,390

Estimated cost of goods sold = $886,390 - $19,700

= $866,690

Therefore,

Adjusted cost of goods sold =

$953,400 - $866,690

= $86,710

In managerial leadership, which part is leadership?
a. understanding.
b. facilitating.
c. exhibiting.
d. influencing.
e. demonstrating.

Answers

Answer:

All of them but if I had to choose it would be D.

Explanation:

In managerial leadership, the leadership aspect encompasses are including "understanding, facilitating, exhibiting, influencing and demonstrating". The correct option is all.

Leadership involves having a deep comprehension of the organization's goals, challenges and the needs of its team members as understanding.

It requires the ability to empower and support employees to reach their full potential and fostering a collaborative and productive work environment as facilitating.

A great leader leads by example, displaying the values, ethics and behaviors expected of their team members as exhibiting.

Effective leadership involves inspiring and motivating, communication, leaders show commitment, competence and dedication to the organization's vision and mission as demonstrating.

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The following is a December 31, 2021, post-closing trial balance for Culver City Lighting, Inc. Account Title Debits Credits Cash $ 63,000 Accounts receivable 47,000 Inventory 53,000 Prepaid insurance 23,000 Equipment 110,000 Accumulated depreciation $ 42,000 Patent (net) 48,000 Accounts payable 16,000 Interest payable 6,000 Notes payable (due in 10 years) 140,000 Common stock 78,000 Retained earnings 62,000 Totals $ 344,000 $ 344,000 a. Calculate the current ratio. b. Calculate the acid-test ratio. c. Calculate the debt to equity ratio.

Answers

Answer:

a. Current ratio = 5.17

b. Acid test ratio = 3.06

c. Debt to equity ratio = 0.26

Explanation:

a. Current ratio = Current assets / Current liabilities

Current t assets = $63,000 + $47,000 + $53,000 + $23,000

= $186,000

Current liabilities = $16,000 + $6,000 + *$14,000

= $36,000

• Note $14,000 is gotten by ; $140,000 / 10 years.

Current ratio = $186,000 / $36,000

= 5.17

b. Acid test ratio = Quick assets / Current liabilities

Quick assets = Current assets w/o inventory

= $63,000 + $47,000

= $110,000

Current liabilities = $36,000

Acid test ratio = $110,000 / $36,000

= 3.06

c. Debt to equity ratio = Total liabilities / Shareholder's equity

Total liabilities = $36,000

Shareholder's equity = $78,000 + $62,000

= $140,000

Debt to equity ratio = $36,000 / $140,000

= 0.26

Value chain activities include all of the following except:
A. Distribution.B. Supply-Chain Management.C. Operations.D. Management Information Systems.

Answers

Answer:

D. Management Information Systems.

Explanation:

Management information system may be defined as it is the system of information which is to be used for the purpose of making the decision, coordinating, controlling, analyzing and visualization of information in an organization.

Therefore the learning of the management information system includes person, technology and process in an organizational context.

While value chain may be defined as it the primary activity and support activity that add values to the customers.

A security will make payments of $25 per month for the next 5 years, plus $1000 at maturity. Which of the following is true? Group of answer choices If the price increases from $1,500 to $1,600 then the period rate will be more than the nominal rate If the price increases from $1,500 to $1,600 then the yield to maturity will increase. If the price increases from $1,500 to $1,600 then the effective rate will increase If the price increases from $1,500 to $1,600 then the yield to maturity will decrease.

Answers

Answer: If the price increases from $1,500 to $1,600 then the yield to maturity will decrease.

Explanation:

If Yields in the market fell, Bonds would still be making the same coupon payments they always have been regardless of this fall. This will lead investors to buy more bonds which will have the effect of raising bond prices.

This therefore shows that Bond prices and Yields are inversely related. If one rises, the other falls. If the price of the security (bond) increases from $1,500 to $1,600 then it follows that the yield to maturity will decrease.

The first papers about servant leadership were written by ______.
a. Spears
b. Liden
c. Greenleaf
d. House

Answers

Answer:

c. Greenleaf

Explanation:

Servant leadership is a type of leadership in which the individual interact with each other it could be either management or fellows employees with a motive to accomplish an authority instead of power. Also it follows that organization structure which is decentralized

And, the first paper with respect to the servant leadership was wrote by Green leaf and the same is to be considered

Hence, the correct option is C.  

Borrowed $4,440 from a local bank on a note due in six months. Received $5,130 cash from investors and issued common stock to them. Purchased $1,500 in equipment, paying $450 cash and promising the rest on a note due in one year. Paid $550 cash for supplies. Bought and received $950 of supplies on account. Prepare a classified balance sheet for Spotlighter, Inc., as of January 31.

Answers

Answer:

Classified balance sheet for Spotlighter, Inc., as of January 31.

Assets

Non-Current Assets    

Equipment                                        $1,500  

Total Non-current assets               $1,500

Current Assets

Supplies                                           $1,500

Cash                                                 $8,570

Total current assets                     $10,070

Total Assets                                   $11,570

Equity and Liabilities

Equity

Common Stock                               $5,130

Total Equity                                     $5,130

Liabilities

Accounts Payable                            $950

Note Payable                                 $5,490

Total Liabilities                             $6,440

Total Equity and Liabilities         $11,570

Explanation:

Step 1 :

First Record the Transactions as follows

J1

Cash $4,440  (debit)

Note Payable $4,440 (credit)

J2

Cash $5,130 (debit)

Common Stock $5,130 (credit)

J3

Equipment $1,500 (debit)

Cash $450 (credit)

Note Payable $1,050 (credit)

J4

Supplies $550 (debit)

Cash $550 (credit)

J5

Supplies $950 (debit)

Accounts Payable $950 (credit)

Step 2 :

Post the Account Balances to the Trial Balance as follows

                                                                            Debit          Credit

Cash ($4,440 + $5,130 - $450 - $550)            $8,570

Note Payable ( $4,440 + $1,050)                                         $5,490

Equipment                                                          $1,500

Supplies ($550 + $950)                                    $1,500

Accounts Payable                                                                    $950

Common Stock                                                                      $5,130

Totals                                                                $11,570       $11,570

Step 3 :

After the Trial Balance has been prepared, Financial Statements can then be prepared using the list of Account Balances. Financial Statement include the Balance sheet that has been required for this question.

_____refers to the quantity of a good or service that businesses are willing and able to provide.
a. Supply
b. Scarcity
c. Demand
d. Trade-off

Answers

Answer:

option a supply is the right answer

You own an oil pipeline which will generate $2 million cash return over the coming year. The pipeline’s operating costs are negligible, and it is expected to last for a very long time. Unfortunately, the volume of oil shipped is declining, and cash flows are expected to decline by 4 % per year. The discount rate is 10 %. What is the PV of the pipeline’s cash flows if its cash flows are assumed to last forever?

Answers

Answer:

$14,285,714.29

Explanation:

we can use the discounted cash flow model formula for a perpetuity:

PV of infinite cash flows = cash flow in 1 year / (required rate of return - growth rate)

cash flow in 1 year = $2,000,000required rate of return = 10%growth rate = -4%

PV of infinite cash flows = $2,000,000 / (10% + 4%) = $14,285,714.29

This formula is used to determine the present value of a firm's future cash flows.

Trey, Inc. reports a taxable loss of $140,000 for 2018. Its taxable incomes for the years 2015 through 2017 respectively were $25,000, $35,000, and $40,000. Trey has no temporary or permanent differences. Trey elects the carryback provision. Trey expects taxable income in future years and has a tax rate of 30% for all periods affected. What should Trey report as Net Loss on its 2018 income statement?

Answers

Answer:

$117500

Explanation:

Taxable loss = $140000 for 2018

Taxable incomes : $25000 for 2015, $35000 for 2016, $40000 for 2017

tax rate = 30%

Net loss on 2018 income statement can be offset by the taxes paid on taxable income for 2 years prior to 2018 ( i.e 2016 and 2017 )

first calculate taxes on taxable incomes for 2016 and 2017

$35000 * 30% = $10500

$40000 * 30% = $12000

hence taxable profit = 10500 + 12000 = $22500

Net loss to be reported on 2018 income statement

= $140000 - $22500 = $117500

Which type of worker would most likely be able to begin work after receiving a high school degree and completing an on-the-job apprenticeship? a miner a forester a conservationist a park worker

Answers

Answer:

I think it would be a park worker

Explanation:

Park workers don't use as much heavy equipment as miners

A worker would most likely be able to begin work after receiving a high school degree and completing an on-the-job apprenticeship is conservationist. Option C is correct.

What is Conservationist?

A conservationist is a person who works to preserve wildlife, plants, or their natural environments. While some environmentalists teach students about environmental issues, others clean up seabirds after oil spills in the water. He might wish to become a conservationist if you are concerned about protecting the environment and wildlife.

A person active in conservation is one who works to safeguard wildlife, plants, and other natural resources as well as to stop the loss and waste of these resources.

Further a person who complete his education Biology A-Levels are essential, as well as at least one other subject. Furthermore, geography has its uses. A BSc in Biology, Environmental Science, or Zoology might be a suitable place to start after A-Levels before specializing during a Masters for post of conservationist.

Thus option C is correct.

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A manager receives a request from an employee to take off a Wednesday for religious reasons. The manager did not know that this employee was particularly religious and does not believe that the leave is for religious reasons. The manager believes that the employee is going to use this day as a personal day off. Should the manager investigate the situation?

Answers

Answer:

Yes

Explanation:

There is no federal law that requires that a manager give an employee days off due to religious reasons. Therefore in this scenario, the manager should investigate the situation further. If the manager finds out that the employee is taking advantage of the manager's generosity and lying then they should get reprimanded for doing so. Otherwise, the employee can have their day off as they asked.

People take permission to be off duty for different reasons. I do not want the manager to investigate the situation. It is a No for me because I believe that as Human being, we have to respect all the religion.

U.S. law clearly stipulated that that employers should not discriminate on the basis of religion and must accommodate for religious needs of the employees.

Forcing employees not to use or take an off days for religious holidays is said to be not advisable.

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During the month of July, the company had the following activities: Issued 4,500 shares of common stock for $450,000 cash. Borrowed $38,500 cash from a local bank, payable in two years. Bought a building for $201,500; paid $53,500 in cash and signed a three-year note for the balance. Paid cash for equipment that cost $247,000. Purchased supplies for $10,600 on account. Prepare a classified balance sheet at July 31.

Answers

Answer:

classified balance sheet at July 31.

Assets

Non-Current Assets

Building                                                                                  $201,500

Equipment                                                                             $247,000

Total Non-Current Assets                                                    $448,500

Current Assets

Supplies                                                                                  $10,600

Cash ($450,000 + $38,500 - $53,500 - $247,000)          $188,000

Total Current Assets                                                            $198,600

Total Assets                                                                          $647,100

Equity and Liabilities

Equity

Common Stock                                                                   $450,000

Total Equity                                                                         $450,000

Liabilities

Current Liabilities

Account Payable                                                                   $10,600

Total Non Current Liabilities                                                $10,600

Non-Current Liabilities

Note Payable ($38,500 + $148,000)                                 $186,500

Total Non Current Liabilities                                              $186,500

Total Liabilities                                                                     $197,100

Total Equity and Liabilities                                                 $647,100

Explanation:

A Balance Sheet is a Financial Statement report that shows the Assets, Liability and Equity balances as at the end of the Reporting period.

gdaniel is working in a job that pays $18,000 per year. He is considering a one-year automobile mechanics course that costs $1,000 for books and tuition. He would stop working for a year while he attends this course. Daniel estimates that this course will increase his income to $23,000 in each of the three years following completion of the course. At the end of those three years, Daniel plans to retire to a commune in Tucson, AZ. The current interest rate is 10 percent. Is it economically rational for Daniel to enroll in the course? Explain and justify your answer.

Answers

Answer:

It is not economically rational for Daniel to enroll in the course

Explanation:

Increase in income = $23,000 - $18,000 = $5,000

i = 10% = 0.1

NPV = -(18,000 + 1,000) + 5,000/(1.1)^1 + 5,000/(1.1)^2 + 5,000/(1.1)^3

NPV = -17,000 + (4545.45 + 4132.22 + 3756.74)

NPV = -17,000 + 12,434.41

NPV = -4,565.59

Conclusion: Since NPV is Negative. Therefore, it is not economically rational. So the answer is NO.

Fred wants to take out a loan. He can afford to make monthly payments of 100 dollars and wants to pay the loan off after exactly 20 years. What is the maximum amount that Fred can afford to borrow if the bank charges interest at an annual rate of 10 percent, compounded monthly

Answers

Answer:

$10,390.96

Explanation:

The formula for the principal amount is

P = A (1 - (1-r)^n / r)

From the given data, A = 100

r =  10 / 100 * 12 = 10 / 1200 = 0.0083

n= 20 * 12 = 240

Now substitute this data in the formula

P = 100 ( 1 - (1 + 0.0083)^-240 / 0.0083)

P = 100 ( 1 - (1/7.27016) / 0.0083)

P = 100 ( 1 - 0.13755 / 0.0083)

P = 100 ( 0.86245 / 0.0083)

P = 100 * 103.90964

P = $10,390.964

P = $10,390.96

The maximum amount that Fred can afford to borrow if the bank charges interest at an annual rate of 10 percent, compounded monthly is $10,390.96

Answer:

Fred can afford to borrow 10362 dollars

beyer company is considering the purchase of an asset for $250,000. It is expected to produce the following net cash flows. The cash flows occur evenly throughout each year. Assume that Beyer requires a 12% return on its investments. Compute the net present value of this investment. Should Beyer accept the investment

Answers

Answer:

Complete question is

Year  Net cash flows

1         $65,000

2         $57,000

3         $81,000

4         $139,000

5         $38,000  

6         $380,000"

Solution

Year            (a)$       (b)$       (c=a*b)$

Year 1 65000 0.893 58045

Year 2 57000 0.797 45429

Year 3 81000 0.712 57672

Year 4 139000 0.636 88404

Year 5 38000 0.567 21546

                                               $271,096

Totals

Total present value of cash inflow (a)   $271,096

Total cash outflow (b)                              $250,000

Net Present Value (c=a-b)                      $21,096

Note:

A = Net Cash Flows

B = Present Value of 1 at 12%

C = Present Value of cash flows

b) Beyer company should accept investment due to positive net present value of $21,096

__________ can be used to create a perfect inflation hedge.
a. Gold
b. Real estate
c. TIPS
d. The S&P 500 Index
e. None of the options are correct.

Answers

Answer:

c. TIPS

Explanation:

TIPS which is an acronym for Treasury inflation-protected securities is a kind of bond peculiar to the United States which is specifically formulated to shield or safeguard investments during the inflation period over a given time. It dynamically adjusts as inflation occurs, thereby protects the direct cost of investment and its rates of returns.

Hence, in this situation, the correct answer is option C. TIPS

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