Question
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%)
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