As the finance manager of your company, you need to decide where to invest. A project

Question:

As the finance manager of your company, you need to decide where to invest.

• A project that pays ₹100,000 one year later; the cost of the project is ₹90,000.

• Alternatively, you can invest in a bank that pays 10 per cent interest.

a. Would you invest in the project or with the bank?

b. What happens if the bank increases its interest rate to 12 per cent?

c. What is the bank interest rate at which you would be indifferent between the two rates?

d. What other aspect will you take into account in determining which of the two options to invest in?

Fantastic news! We've Found the answer you've been seeking!

Step by Step Answer:

Related Book For book-img-for-question

Corporate Finance Theory And Practice In Emerging Economies

ISBN: 9781108486965

1st Edition

Authors: Sunil Mahajan

See More Books

Question Posted: Feb 24, 2024 03:01 AM

See More Questions

Managing Scope Changes Case Study Scope changes on a project can occur regardless of how well the project is planned or executed. Scope changes can be the result of something that was omitted during...
For each problem, show your work steps. A correct answer with no work shown gets half credit (which means you fail the assignment). An incorrect answer with no work receives 0 credit. With time value...
1. As friends of Anna you have been asked to assist her in the preparation of a recommendation. You are to prepare the following: 2. Write an executive summary to the CEO and the board supported by...
Question 4 Tic-tac-toe (also known as noughts and crosses) is a game for two players, X and O, who take turns marking the spaces in a 3x3 grid. The player who succeeds in placing three of their marks...
If a company with a December 31 year-end lends money in the form of a six-month note on November 1, which accounts will be credited when the note is paid off on 4/30?
Bianca Bicycle Company manufactures mountain bikes with a variable cost of $200. The bicycles sell for $350 each. Budgeted fixed manufacturing overhead for the most recent year was $2,200,000....
Why would an investor find convertible preferred stock attractive? AppendixLO1
Which of the many purposes of the project portfolio process are most important to a firm with a low project management maturity? Which to a firm with high maturity?
Price Question Ivan Company was en herlightweight cowboard that is considered to be one of the best on the marketInformation follows for Ivanhe purchases and sales of the lightweight in Date Tv Unit...
You have four loans outstanding to your friend: 100,000 after 3 years, 50,000 after 5 years, 150,000 after 7 years and 200,000 after 10 years. You wish to consolidate the loans and pay him with six...
What are the values of 5,000 invested under the following assumptions? a. 10 per cent compounded annually for seven years b. 10 per cent compounded semi-annually for seven years c. 10 per cent...
In Problems 93100, simplify each expression. Express your answer so that only positive exponents occur. Assume that the variables are positive. x3/4x1/3x-1/2
1. The KYM company wants to invest $ 523,000 pesos in the bank that guarantees a simple interest rate of 3.32% quarterly. If the company is considering the 8-month investment. What amount will you...
3. (5 points) The uncertainty principle limits our ability to determine simultaneously the position and momentum of a particle. (a) Why were classical physicists unaware of the limitations that this...
CASE STUDY Patient Name Valarie Ramirez Attending Paul F. Buckwalter, MD PATIENT INFORMATION DOB 08/04/1986 Allergies MAN 00-AA-006 Penicillin Other Information Past HX: AB x1 Valarie Ramirez arrives...
Petesy Corporation is preparing its Master Budget for 2019. Budget information is as follows: SalesProduction CostOperating Expenses 20191 st Quarter P280,000P192,000P64,000 2 nd Quarter 320,000...
A steady flow of 20 m3/s of moist air at TDB = 35iC, TWB = 25iC, 100 kPa (state 1) is dehumidified by first cooling it and condensing out moisture (state 2), then reheating it to 20iC and 50% R.H....
Sports bags Inc. makes and sells backpacks for students. Financial projections for this line of products are revenue of $1 238 000, total variable costs of $841 840, and fixed costs of $218 000....
The diameter of a sphere is 18 in. Find the largest volume of regular pyramid of altitude 15 in. that can be cut from the sphere if the pyramid is (a) square, (b) pentagonal, (c) hexagonal, and (d)...
What is the interest tax shield?
With corporate income taxes, explain why a firms value can be higher with leverage even though its earnings are lower.
Hubbard Industries is an all-equity firm whose shares have an expected return of 10%. Hubbard does a leveraged recapitalization, issuing debt and repurchasing stock, until its debt-equity ratio is...
You have just been hired as a new management trainee by Earrings Unlimited, a distributor of earrings to various retail outlets located in shopping malls across the country. In the past, the company...
Brief Exercise 10-6 Flint Inc. purchased land, building, and equipment from Laguna Corporation for a cash payment of $327,600. The estimated fair values of the assets are land $62,400, building...
"faithful respresentation" is the overriding principle that should be followed in ones prepaparation of IFRS-based financial statement. what is it? explain it fully quoting IAS. how this this...

As the finance manager of your company, you need to decide where to invest. A project

Question:

Step by Step Answer:

Investment Decision Making Project vs Bank a Invest in the project or the bank To answer this question we need to compare the potential returns of bot...View the full answer

Corporate Finance Theory And Practice In Emerging Economies

Students also viewed these Business questions