Question

youre contemplating purchasing a business and you have two options. the first business will have an...

youre contemplating purchasing a business and you have two options. the first business will have an initial investment of 42000. you estimate the business will generate cashflow of 14000 per year for the first five years. The second option has an initial investment of 28000 and has cashflows of 12000 in year 1 and then 10000annually in years 2-5. You are more concerned with getting your money back quickly,and use 3 years as your payback period. which project should you select based on the information provided. Explain your answer

Business   Finance   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
You are considering two investment options. In option A, you have to invest $4500 now and...
You are considering two investment options. In option A, you have to invest $4500 now and $1000 three years from now. In option B, you have to invest $3500 now, $1000 a year from now, and $1000 three years from now. In option A, you will receive four annual payments of $2000 each (you will get the first $2000 payment a year from now). In option B, you will receive a payment equal to $4000 at the beginning of year...
As a business owner you have two business opportunities that are presented to you. Both options...
As a business owner you have two business opportunities that are presented to you. Both options will present future cash flows over a three year period. To determine what option you are going to select a net present value analysis will be performed. One of the options is rather risky and the future cash flows are not certain. The other option is not that risky and future cash flows are known and consistent. Explain the relationship between the risk of...
Consider two investment options, A and B. For option A you must invest $5,000 now and...
Consider two investment options, A and B. For option A you must invest $5,000 now and an additional $1,000 three years from now. For option B you must invest $3,500 now, $1,500 next year, and $1000 three years from now. In both cases you will receive four annual payments of $2,000, the first of these payments one year from now. Which option would you prefer using a) simple payback method b) discounted payback method, assuming a MARR of 10% c)...
You have an entrepreneurial spirit and decide to start your own business. You know you first...
You have an entrepreneurial spirit and decide to start your own business. You know you first have to consider the degree of digitization you are going to pursue your new business. What does this mean? What are your options? Which option would you choose and why?
Molly is considering opening a Campus Delivery business. The initial investment for the business is $263,000,...
Molly is considering opening a Campus Delivery business. The initial investment for the business is $263,000, which includes purchasing delivery vehicles and other investments. For tax purposes, the projected salvage value of the delivery vehicles is $25,000. The government requires depreciating the vehicles using the straight-line method over the business’s life of 10 years. Molly is trying to estimate the net cashflows after tax for this business. She has already figured out that the business will generate an annual after-tax...
Lottery problem. You win a lottery of $10 million. You have the following two options to...
Lottery problem. You win a lottery of $10 million. You have the following two options to receive it. First, to receive $1million each year at the end of each year for 10 years (annuity option). Second, to receive $5 million right now (cash option). Make sure that you draw the timelines for the two options in order to understand the alternatives. Show your work in answering the questions. a) What is the present value of the annuity option? Assume the...
You have the option of purchasing a house for $250,000. You will rent this property out...
You have the option of purchasing a house for $250,000. You will rent this property out for a total of $2,000 per month. You estimate that operations and maintenance will cost $12,000 per year. In 20 years you plan to retire to another country and sell the property for $310,000. By what percentage could you decrease the monthly rent before the initial investment is no longer worth it? Assume a MARR of 0.25% per month
You have $100 and think where to invest your money. You have three options. Option A...
You have $100 and think where to invest your money. You have three options. Option A promises you a weekly interest rate of 0.3%, compounded weekly. Option B promises a 16% annual interest rate with one payment at the end of each year. Finally, option C has a quoted annual rate of 15% with quarterly compounding. Assume that a year consists of 52 weeks. (a) (3 points) What are APRs of the three investment opportunities? (b) (6 points) Rank these...
Today is your 20th birthday and you must choose between two retirement options. The first option...
Today is your 20th birthday and you must choose between two retirement options. The first option will provide you with 15 equal annual payments of $75,000 beginning on your 65th birthday. The second option will provide you with one payment of $1,500,000 on your 70th birthday. If the interest rate is 7 percent per year and you are assured of living to at least 80 years of age, what is the present value of the first option (at your 20th...
Tulsa Company is considering investing in new bottling equipment and has two options: Option A has...
Tulsa Company is considering investing in new bottling equipment and has two options: Option A has a lower initial cost but would require a significant expenditure to rebuild the machine after four years; Option B has higher maintenance costs, but also has a higher salvage value at the end of its useful life. Tulsa’s cost of capital is 11 percent. The following estimates of the cash flows were developed by Tulsa’s controller:   A B Initial Investment 320,000 454,000 Annual Cash...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT