Galvanized Products is considering a new computer system for their enterprise data management system. The vendor has quoted a purchase price of $100,000. Galvanized Products is planning to borrow one-fourth of the purchase price from a bank at 15 percent compounded annually. The loan is to be repaid using equall annual payments over a 3-year period. The computer system is expected to last 5 years and has a salvage value of $5,000 at that time. Over the 5-year period, Galvanized Products expects to pay a technician $25,000 per year to maintain the system but will save $55,000 per year through increased effciencies. Galvanized Products uses a MARR of 18 percent/year to evaluate investments.a) what is the present worth of this investment?
b) should the new computer system be purchased?
Answers
Galvanized Products consideration to buy a new computer system for their enterprise data management system with the purchase price of $100,000 is being a good decision
Explanation:
Purchase value $100,000
cash on hand 75,000 + bank loan 1/4 of $100,000= $25000 =$100,000
Estimated Income
(increased efficiencies-payment to technician+MARR )× 5( life span )+ 5000 (salvage value )
(($55,000-$25,000=30,000)+(100,000×18÷100)=18000))×5 =$240,000+5000 = $245,000
Expected liabilities
bank loan interest=((P*(1+i)^n) - P)=(25,000×(1+0.15)^3-25,000)= 13,022
Net value of the purchase proposal
(Estimated Income - Expected liabilities) - Purchase price
= (245,000 - 13,022) = $231,978 - $100,000 = $131,978 (profit)
Hence ,the Galvanized Products consideration to buy a new computer system is a good decision.
Final answer:
The present worth of this investment is -$30,911.60, and the new computer system should not be purchased as the current estimates show that the benefits do not outweigh the costs at the 18% discount rate.
Explanation:
To determine whether the investment is worth it, we will need to calculate the Net Present Value (NPV) of the investment. This takes into account the present value of both the costs and the benefits associated with the investment.
Let's start by calculating the present value of the costs:
- The system itself costs $100,000.
- The loan is $25,000, compounded annually at a rate of 15% over 3 years, which results in a total repayment of roughly $31,357.50 using the formula P(1+r)^n.
- The technician costs amount to a total of $125,000 over 5 years. If we discount these payments back to their present value using the rate of 18%, we get approximately $88,938.24. Using the formula [P/(1+r)^n] for each year and adding them up.
The total present value of costs is therefore roughly $220,295.74.
Next, let’s calculate the present value of the benefits. This is comprised of the $55,000 savings per year due to increased efficiencies, discounted back to present value over 5 years at a rate of 18%, which results in approximately $184,384.14. Then we add the salvage value of the system, which is $5,000, because this value is already in present terms.
The total present value of the benefits is thus around $189,384.14.
The net present value (NPV), calculated by subtracting the present value of costs from the present value of benefits, is thus around -$30,911.60. Since this is a negative value, this suggests that the anticipated benefits of the system does not outweigh its costs at the 18% discount rate.
Therefore: a) the present worth of this investment is about -$30,911.60 and b) the new computer system should not be purchased, based on these calculations and assumptions.
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Answers
Answer: Please refer to Explanation
Explanation:
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Foreign Portfolio Investment however, is investing in another country by means of purchasing shares, bonds or other financial instruments from that country.
Therefore we can then classify the above accordingly,
Buying bonds issued by a foreign government. FOREIGN PORTFOLIO INVESTMENT.
Opening up a factory in a foreign country. FOREIGN DIRECT INVESTMENT.
An individual investor is more likely to engage in foreign direct investment than a corporation. FALSE.
Foreign Direct Investment would simply be too expensive for the average individual to engage in. It is way more likely to be a Corperation.
Compute the EAC for both machines.
Answers
T-1:
Table-1 vide annex
Applying EAC formula
c = \frac{r(NPV)}{(1-(1+r)^{-n} )}
c: equivalent annuity cash flow
NPV: Net present value
r: rate per period
n: number of periods
we have
c = $ - 98 982,63
T-2
Table-2 vide annex
Applying EAC formula
c = \frac{r(NPV)}{(1-(1+r)^{-n} )}
c: equivalent annuity cash flow
NPV: Net present value
r: rate per period
n: number of periods
we have
c = - $ 97 511.17
(b) Suppose the currency—deposit ratio rises to .10, while the reserve—deposit ratio and monetary base remain unchanged. Calculate the money multiplier, the money supply, and the new values of CU, RES, and DEP.
Answers
Answer:
a. 6.625.
b. C = 80 billion, DES = 800 billion and RES = 80 billion.
Explanation:
a) Monetary base = CU + RES = 160 billion. Money supply = CU + DES = 1060 billion. R-D ratio = 100/1000 = 0.10, C-D ratio = 60/1000 = 0.06, money multiplier = (1 + C-D)/(C-D + R-D) = (1 + 0.06)/(0.10 + 0.06) = 6.625.
b) Money multiplier = (1 + 0.10)/(0.10 + 0.10) = 5.5, money supply = monetary base x multiplier or money supply = 160 x 5.5 = 880 billion. CU + DES = 880 billion and C-D = 0.10. Hence C = 80 billion, DES = 800 billion and RES = 80 billion.
Answers
Answer:
6.47%
Explanation:
The computation of effective annual yield is shown below:-
Annual YTM = 6.37%
Semiannual YTM = 6.37% ÷ 2
= 3.185%
Effective Annual Yield = (1 + Semiannual YTM)^2 - 1
= (1 + 0.03185)^2 - 1
= 1.03185^2 - 1
= 1.0647 - 1
= 0.0647
or
= 6.47%
Hence, the effective annual yield is 6.47% i.e come after applying the above formula
Answers
Different insights and opinions in a collaborative setting can open up new better methods
Answers
Answer:
5
Explanation:
15 - 10 = 5