Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

1. After four challenging yet fruitful years, you just graduated from college. Your parents gave you P150,000 cash as a graduation gift and advised you

1. After four challenging yet fruitful years, you just graduated from college. Your parents gave you P150,000 cash as a graduation gift and advised you to put it in a savings account to earn a 10% rate of return for 4 years. However, being a pet lover, you went to the pet shop and bought a pair of pet dogs worth P150,000. What is the best estimate of the opportunity cost for this decision? (Use 4 decimals for future value factors).

a. P0 b. P69,615 c. P60,000 d. P198,075

2. Consider the following project which costs P2,000 with a salvage value of zero in 4 years. The project will produce a new widget which will be sold for P135 and has variable costs of P95 per unit. The company has fixed costs of P3,000 and a required return on projects of 14.5%. If the company sells 200 units, what is the firm's degree of leverage?

a. 2.4

b. 1.1

c. 2.9

d. 1.6

3. The companyhas a P1,000 par value bond outstanding with 25 years to maturity. The bond carries an annual interest payment of P88 and is currently selling for P925. The company is in a 30% tax bracket. Compute for the approximate after tax-cost of debt.(Round off to two decimal places between computations. Round off the final answer to two decimal places. Example of writing your answer 2.58%)

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Accounting Tools For Business Decision Making

Authors: Paul D. Kimmel,  Jerry J. Weygandt,  Jill E. Mitchell

8th Edition

1119791057, 978-1119791058

More Books

Students also viewed these Accounting questions

Question

Factor the given expressions completely. a 2 x 2 + a 2

Answered: 1 week ago