Evee Cardenas is interested in investing in a women's specialty shop. The cost of the investment is $280,000. She estimates that the return from owning her own shop will be $35,000 per year. She estimates that the shop will have a useful life of 6 years. Assuming a required rate of return of 8%, calculate the NPV for Evee Cardenas' investment. What if the estimated return was $135,000 per year? Calculate the new NPV for Evee Cardenas' investment.
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- Evee Cardenas is interested in investing in a women's specialty shop. The cost of the investment is $280,000. She estimates that the return from owning her own shop will be $35,000 per year. She estimates that the shop will have a useful life of 6 years. Assuming a required
rate of return of 8%, calculate the NPV for Evee Cardenas' investment. What if the estimated return was $135,000 per year? Calculate the new NPV for Evee Cardenas' investment.
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- Bouvier Restaurant is considering an investment in a grill that costs $140,000, and will produce annual net cash flows of $21,950 for 8 years. The required rate of return is 6%. Compute the net present value of this investment to determine whether Bouvier should invest in the grill.Manny Kurr is considering the purchase of a beauty salon. The initial cost of this purchase is $16,000. The after-tax cash flows from this investment should be $4,000 per year for the next 5 years. His opportunity cost of capital is 10 percent. Calculate the following:a. Payback—Should Manny buy the beauty salon based on payback if hisrequired payback is less than 3 years?b. The present value of the benefits (PVB),c. The present value of the costs (PVC),d. The net present value (NPV )—Should Manny buy the beauty salon based on NPV rules?e. Profitability index (PI )—what does the profitability index mean in terms of buying the beauty salon?f. Internal rate of return (IRR), (Hint: Use interpolation)—should Manny buythe beauty salon based on IRR rules?g. Accounting rate of return (ARR)—Should Manny buy the beauty salon based on the ARR? (please answer e,f, & g)Evee Cardenas is interested in investing in a women's specialty shop. The cost of the investment is $180,000. She estimates that the return from owning her own shop will be $55,000 per year. She estimates that the shop will have a useful life of 6 years. Required: 2. Conceptual Connection: Assuming a required rate of return of 8%, calculate the NPV for Evee Cardenas' investment. Round to the nearest dollar. If required, round all present value calculations to the nearest dollar. Use the minus sign to indicate a negative NPV.$fill in the blank 3 Should she invest?Yes/no
- Manny Kurr is considering the purchase of a beauty salon. The initial costof this purchase is $16,000. The after-tax cash flows from this investmentshould be $4,000 per year for the next 5 years. His opportunity cost of capitalis 10 percent. Calculate the following:a. Payback—Should Manny buy the beauty salon based on payback if hisrequired payback is less than 3 years?b. The present value of the benefits (PVB),c. The present value of the costs (PVC),d. The net present value (NPV )—Should Manny buy the beauty salon basedon NPV rules?e. Profitability index (PI )—what does the profitability index mean in terms ofbuying the beauty salon?f. Internal rate of return (IRR), (Hint: Use interpolation)—should Manny buythe beauty salon based on IRR rules?g. Accounting rate of return (ARR)—Should Manny buy the beauty salonbased on the ARR?Marian Plunket owns her own business and is considering an investment. If she undertakes the investment, it will pay $16,000 at the end of each of the next 3 years. The opportunity requires an initial investment of $4,000 plus an additional investment at the end of the second year of $20,000. What is the NPV of this opportunity if the interest rate is 3% per year? Should Marian take it? The NPV of this opportunity is $____ (Round to the nearest dollar.)You have just been offered an opportunity to buy a working daily farm in lowa .The seller shows you financial statements that suggest the investment will provide a cash flow of $80,000 per year .If you assume the farm can operate indefinitely, and you require a 12.8% return on the investment, what is the most you would be willing to pay for the farm.
- Jane wants to set aside funds to take an around the world cruise in four years. Jane expects that she will need $20,000 for her dream vacation. If she is able to earn 8% per annum on an investment, how much will she have to set aside today so that she will have sufficient funds available?You are working as a personal financial adviser. Alecia, one of your clients approached you for consultation about her plan to buy her dream house that costs $400,000. Alecia has a saving of $100,000 and is considering two alternative options: Investment 1: Investing that $100,000 in an investment that would pay a rate of return of 9% annually, compounding semi-annually for 15 years. Investment 2: Buying her dream house now. Then Alecia needs to borrow $300,000 mortgage from Prosperity Bank. The current interest rate the bank offered for the new mortgage is 4% annually, compounding monthly. The standard life of mortgage in Australia is 30 years. Required: Compute the effective annual interest rate (EAR) Alecia would actually get in Investment 1. Calculate the amount of money Alecia would accumulate in Investment 1 after 15 years. In Investment 1, how many year longer does Alecia need to wait until she has $400,000 to buy her dream house? Calculate the monthly mortgage payment…You are working as a personal financial adviser. Alecia, one of your clients approached you for consultation about her plan to buy her dream house that costs $400,000. Alecia has a saving of $100,000 and is considering two alternative options: Investment 1: Investing that $100,000 in an investment that would pay a rate of return of 9% annually, compounding semi-annually for 15 years. Investment 2: Buying her dream house now. Then Alecia needs to borrow $300,000 mortgage from Prosperity Bank. The current interest rate the bank offered for the new mortgage is 4% annually, compounding monthly. The standard life of mortgage in Australia is 30 years. Required: 1) Calculate the monthly mortgage payment Alecia needs to pay for 30 years in Investment 2. 2) In investment 2, if Alecia leases the house to a company for a rent of $400 per week for 10 years, and put that rent in her bank account at the beginning of each week, how much money she will have in her bank account after 10 years if…
- You are working as a personal financial adviser. Alecia, one of your clients approached you for consultation about her plan to buy her dream house that costs $400,000. Alecia has a saving of $100,000 and is considering two alternative options: Investment 1: Investing that $100,000 in an investment that would pay a rate of return of 9% annually, compounding semi-annually for 15 years. Investment 2: Buying her dream house now. Then Alecia needs to borrow $300,000 mortgage from Prosperity Bank. The current interest rate the bank offered for the new mortgage is 4% annually, compounding monthly. The standard life of mortgage in Australia is 30 years. Required: Calculate the monthly mortgage payment Alecia needs to pay for 30 years in Investment 2. In investment 2, if Alecia leases the house to a company for a rent of $400 per week for 10 years, and put that rent in her bank account at the beginning of each week, how much money she will have in her bank account after 10 years if the…You are working as a personal financial adviser. Alecia, one of your clients approached you for consultation about her plan to buy her dream house that costs $400,000. Alecia has a saving of $100,000 and is considering two alternative options: Investment 1: Investing that $100,000 in an investment that would pay a rate of return of 9% annually, compounding semi-annually for 15 years. Investment 2: Buying her dream house now. Then Alecia needs to borrow $300,000 mortgage from Prosperity Bank. The current interest rate the bank offered for the new mortgage is 4% annually, compounding monthly. The standard life of mortgage in Australia is 30 years. Required: 1) Compute the effective annual interest rate (EAR) Alecia would actually get in Investment 1. 2) Calculate the amount of money Alecia would accumulate in Investment 1 after 15 years. 3) In Investment 1, how many year longer does Alecia need to wait until she has $400,000 to buy her dream house? 4) Calculate the monthly mortgage…You are working as a personal financial adviser. Alecia, one of your clients approached you for consultation about her plan to buy her dream house that costs $400,000. Alecia has a saving of $100,000 and is considering two alternative options: Investment 1: Investing that $100,000 in an investment that would pay a rate of return of 9% annually, compounding semi-annually for 15 years. Investment 2: Buying her dream house now. Then Alecia needs to borrow $300,000 mortgage from Prosperity Bank. The current interest rate the bank offered for the new mortgage is 4% annually, compounding monthly. The standard life of mortgage in Australia is 30 years. 4) Calculate the monthly mortgage payment Alecia needs to pay for 30 years in Investment 2. 5) In investment 2, if Alecia leases the house to a company for a rent of $400 per week for 10 years, and put that rent in her bank account at the beginning of each week, how much money she will have in her bank account after 10 years if the…
