A new machine tool is expected to generate receipts as follows: $5,000 in year one; $3,000 in year two, nothing in the next year, and $2,000 in the fourth year. At an interest rate of 6%, what is the present value of these receipts? Is this a better present value than $2,500 each year over four years? Explain.
5,000 × .943 + 3,000 × .890 + 2,000 × .792 = $8,969 using Table S7.1 in the text ($8,971.16 using Excel). The steady stream generates NPV of 2,500 × 3.465 = $8,662.5 ($8,662.76 using Excel). The irregular stream has the higher present value because the larger receipts are early.
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The respect we give to the law as a source of authority is in part a recognition of the fact that in the absence of law,we would rely solely on the goodwill and dependability of one another.
A company reports the following: Net income$270,000 Preferred dividends$10,000 Shares of common stock outstanding20,000 Market price per share of common stock$36.40
?Calculate the company's price-earnings ratio. Round your answer to one decimal place.
Price-Earnings Ratio = Market Price per Share of Common Stock/Earnings per Share on Common Stock?
Earnings per Share on Common Stock = (Net Income - Preferred Dividends)/Shares of Common Stock Outstanding Earnings per Share = ($270,000 - $10,000)/20,000 Earnings per Share = $13.00
?Price-Earnings Ratio = $36.40/$13.00 Price-Earnings Ratio = 2.8
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Listed below are several types of pronouncements that the FASB issues.Following the list is a series of descriptive statements. Required: Match each pronouncement with its descriptive statement by placing the appropriate letter in the space provided.