Accounting: What the Numbers Mean
11th Edition
ISBN: 9781259535314
Author: David Marshall, Wayne William McManus, Daniel Viele
Publisher: McGraw-Hill Education
expand_more
expand_more
format_list_bulleted
Textbook Question
Chapter 3, Problem 3.7E
Exercise 3.7
LO 2
Compare investment alternatives Two acquaintances have approached you about investing in business activities in which each is involved. Velterine is seeking $4,000 and Francis needs $5,000. One year from now your original investment will be returned, along with S740 income from Velterine or $850 income from Francis. You can make only one investment.
Required:
- Which investment would you prefer? Why? Round your percentage answer to two decimal places.
- What other factors should you consider before making either investment?
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solutionStudents have asked these similar questions
esc
A ALEKS-Harley Biltoc - Learn
O Exponential and Logarithmic Functions
Finding the present value of an investment earning compound interest
$
Explanation Check
50
F1
*
To help with a down payment on a home, Rita is going to invest. Assuming an interest rate of 1.67% compounded daily, how much would she have to invest to
have $23,400 after 8 years?
F2
A
Do not round any intermediate computations, and round your final answer to the nearest dollar. If necessary, refer to the list of financial formulas. Assume there
are 365 days in each year.
80
F3
X
9
F4
www-awu.aleks.com
$
myPascoConnect
F5
MacBook Air
F6
Ć
F7
DII
F8
2/5
DD
F9
Portal
F10
© 2023 McGraw Hill LLC. All Rights Reserved. Terms of Use | Privacy Center | Accessibility
Harley V
4
F11
Español
& T
?
A₁
4)
F12
Exercise 3-7 (Algo) Compare investment alternatives LO 2
Two acquaintances have approached you about investing in business activities in which each is involved. Simone is seeking
$560, and Riley needs $605. One year from now, your original investment will be returned, along with $50 income from
Simone or $53 income from Riley. You can make only one investment.
Required:
a-1. Compute the ROI of Simone and Riley. (Round your answers to 2 decimal places.)
ROI
Simone
Riley
%
%
Question 5
Investment products have different probabilities of success. A businessman wishes
to invest in two different products, A and B. The following table shows the
probability distributions, where P(a, b) represents the probability of success of the
ith investment of A and the ih investment of B, for the values (in thousands of GH¢)
for A and B invested in 4 different years. Base on this information:
(a)
(b)
(c)
A
B
P(a,b)
3
6
0.3
2
4
0.2
5
3
0.4
1
2
0.1
Which of the investments has a better return and why?
Which of the investments is relatively less risky and why?
What type of association exists between the two investment options A and
B? Interpret your results.
Chapter 3 Solutions
Accounting: What the Numbers Mean
Ch. 3 - Prob. 3.1MECh. 3 - Mini-Exercise 3.2 LO 3 ROI analysis using the...Ch. 3 - Mini-Exercise 3.3 LO 4 Calculate ROE Firm L had...Ch. 3 - Prob. 3.4MECh. 3 - Mini-Exercise 3.5 LO 6 Calculate current...Ch. 3 - Mini-Exercise 3.6 LO 6 Calculate working capital...Ch. 3 - Exercise 3.7 LO 2 Compare investment alternatives...Ch. 3 - Prob. 3.8ECh. 3 - Exercise 3.9 LO 2 Compare investment alternatives...Ch. 3 - Exercise 3.10 LO 2 Compare investment alternatives...
Ch. 3 - Exercise 3.11 LO 3 ROI analysis using the DuPont...Ch. 3 - Prob. 3.12ECh. 3 - Prob. 3.13ECh. 3 - Prob. 3.14ECh. 3 - Exercise 3.15 LO 6 Effect of transactions on...Ch. 3 - Exercise 3.16 LO 6 Effect of transactions on...Ch. 3 - Calculate profitability measures using annual...Ch. 3 - Prob. 3.18PCh. 3 - Problem 3.19 LO 6 Calculate and analyze liquidity...Ch. 3 - Problem 3.20 LO 6 Calculate and analyze liquidity...Ch. 3 - Problem 3.21 LO 3 Applications of ROI using the...Ch. 3 - Prob. 3.22PCh. 3 - Case 3.23 LO 3. 4, 6, 2 Focus company-analysis of...Ch. 3 - Case 3.24 LO 3, 4, 6, 7 Analysis of liquidity' and...
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Similar questions
- Exercise 3-11 (Algo) Compare investment alternatives LO 3-2 Your friend has two investment opportunities that she is considering and has asked for your advice regarding how she should proceed. One will have an 10.0% rate of return on an investment of $540; the other will have a 14.0% rate of return on an investment of $760. She would like to take advantage of the higher-yielding investment but has only $540 available. Required: What is the maximum rate of interest that your friend should be willing to pay to borrow the $220 needed to take advantage of the higher yield? Note: Do not round intermediate calculations. Round your answer to 2 decimal places. Maximum rate of interest % 4 27arrow_forwardQ2 Your investment client has been offered the following two mutually exclusive investments: Year Investment A Investment B 0 (400,000) (450,000) 1 75,000 60,000 2 75,000 60,000 3 100,000 125,000 4 100,000 125,000 5 100,000 125,000 6 140,000 125,000 (i) Calculate the Payback period and the…arrow_forwardYour cousin Vance tells you that you can invest $15,000 in his business, and he will pay you back $25,000 in 2 years' time. What is the return on this investment? Multiple Choice 15.59% 30.00% 66.67% 29.10% 32.72%arrow_forward
- Question list Question 1 Question 2 O Question 3 O Question 4 K A local entrepreneur asks you to invest $3,000 in a business venture. Based on your estimates, you would receive nothing for 3 years, at the end of year 4 you would receive $1,081, and at the end of year 5 you would receive $4,374. If your estimates are correct, what would be the IRR on this investment? The yield on this investment is %. (Round to the nearest whole percent.)arrow_forwarduppose you had the following propositions of returns from two companies W and Y: Company Returns (OMR) Comments W 1204 Company W proposes to give 1204 Rial today Y 1550 Company Y proposes to give you 1550 but after 2 years You also know that the Interest Rate is by 10%.Question: In which company do you choose to invest your money and why?arrow_forwardAssume that you own an annuity that will pay you $15,000 per year for 12 years, with the first payment being made today. You need money today to open a new restaurant, and your uncle offers to give you $120,000 for the annuity. If you sell it, what rate of return would your uncle earn on his investment? Select the correct answer. a. 8.41% b. 8.21% c. 8.51% d. 8.31% e. 8.61%arrow_forward
- A Question 1 Suppose you are offered an investment that will allow you to triple your money in 8 years. What is the implied rate of interest? Retake question O 14.72 percent O 9.26 percent Not enough information 11.61 percent 8.50 percentarrow_forwardtion □ [myUT 1 ovide your answer below: N Module 2.5: Understanding ALT Courses CURRENT OBJECTIVE Calculate the monthly payment and interest cost for a mortgage Question A mutual fund manager wishes to purchase a property that's been valued at $1.5 m. She has $200,000 in cash to use as a deposit, and she will require a mortgage for the rest. The annual interest rate on the loan is 2.45% and the loan is for 25 years. Calculate the monthly payments. Round your answer to the nearest cent. Do NOT round until you have calculated the final answer. X C knewton.com V B Module 2.5: Understanding & in N FEEDBACK 3 V- Content ALT MORE INSTRUCTION A + 2.1 FN 88 11 SUB SHIFT 4arrow_forward9. Choosing a real estate investment Aa Aa Comparing Real Estate Investments Suppose Vicky wants to invest in real estate and is considering two different residential properties. Based on the expected incomes and operating expenses of each, she estimates that the first property (property A) has an NOI of $43,000 and that the other (property B) has an NOI of $32,000. If the cap rate is 9%, property A has an estimated value of and property B has an estimated value of In deciding between these two properties, it is important for Vicky to consider other factors. For instance, in general, only seasoned investors should invest in property. Alternatively, Vicky might want to consider investing in a real estate investment trust (REIT), a type of investment company that operates similarly to mutual fund. Which of the following statements regarding REITS are true? Check all that apply. They pay dividends. They can increase the diversification of individuals who are already invested in the stock…arrow_forward
- O Exponential and Logarithmic Functions Finding the present value of an investment earning compound interest www-awu.aleks.com $ C To help with her retirement savings, Latoya has decided to invest. Assuming an interest rate of 3.55% compounded daily, how much would she have to invest to have $132,700 after 17 years? X Harley V Do not round any intermediate computations, and round your final answer to the nearest dollar. If necessary, refer to the list of financial formulas. Assume there are 365 days in each year. Español ? ^ 圖 □ 。 □ Asarrow_forwardA ALEKS - Harley Biltoc - Learn O Exponential and Logarithmic Functions Finding the present value of an investment earning compound interest Explanation Check X www-awu.aleks.com S myPascoConnect C To help with his retirement savings, Pablo has decided to invest. Assuming an interest rate of 3.43% compounded quarterly, how much would he have to invest to have $128,900 after 16 years? Do not round any intermediate computations, and round your final answer to the nearest dollar. If necessary, refer to the list of financial formulas. MacBook Air 3/5 Portal Harley Ⓒ2023 McGraw Hill LLC. All Rights Reserved. Terms of Use | Privacy Center | Acces.arrow_forwardQuestion list Question 4 Question 5 O Question 6 Question 7 Question 8 O Question 9 K Kate Berry will not invest unless she can earn at least a(n) 10% return. She is evaluating an investment opportunity that requires an initial outlay of $2,200 and promises to return $4,400 in 8 years. a. Use present value techniques to estimate the IRR on this investment. b. On the basis of your finding in part a, should Kate make the proposed investment? Explain. a. The yield on this investment is%. (Enter as a percentage and round to two decimal places.) b. On the basis of your finding in part a, should Kate make the proposed investment? (Select the best answer below.) A. No, because a minimum required return of 10% does not compensate for an investment that lasts longer than one year. O B. Yes, because a minimum required return of 10% is an arbitrary choice for an investment of this risk level. C. Yes, because this investment yields more than the minimum required return of 10%. D. No, because this…arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
- AccountingAccountingISBN:9781337272094Author:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.Publisher:Cengage Learning,Accounting Information SystemsAccountingISBN:9781337619202Author:Hall, James A.Publisher:Cengage Learning,
- Horngren's Cost Accounting: A Managerial Emphasis...AccountingISBN:9780134475585Author:Srikant M. Datar, Madhav V. RajanPublisher:PEARSONIntermediate AccountingAccountingISBN:9781259722660Author:J. David Spiceland, Mark W. Nelson, Wayne M ThomasPublisher:McGraw-Hill EducationFinancial and Managerial AccountingAccountingISBN:9781259726705Author:John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting PrinciplesPublisher:McGraw-Hill Education
Accounting
Accounting
ISBN:9781337272094
Author:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:Cengage Learning,
Accounting Information Systems
Accounting
ISBN:9781337619202
Author:Hall, James A.
Publisher:Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis...
Accounting
ISBN:9780134475585
Author:Srikant M. Datar, Madhav V. Rajan
Publisher:PEARSON
Intermediate Accounting
Accounting
ISBN:9781259722660
Author:J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:9781259726705
Author:John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:McGraw-Hill Education
Consolidated financial statements; Author: The Finance Storyteller;https://www.youtube.com/watch?v=DTFD912ZJQg;License: Standard Youtube License