Homework Questions

Investment Analysis Part A Use the following information to analyze the two different investments given the Investment Analysis Part B three methods of NPV, Payback and Simple Rate of Retu different investments of $16,000 each and an interest rate of 5.0%. formation: two Use the following table to solve for the present value of the cash flow in year 4 and ent B, note you will need to calculate the also the total net present value for Investment B, note you discount factor for year four in order to calculate the present value for year four. Year Investment A $4,000 Investment B Remember the discount value is calculated as follows: 1/(1 + int rate)^n, where n is the year to the nth power. Hint, your year 4 discount factor should be between $4,000 0.864 (year 3) and 0.784 (year 5). $4,000 $4,000 $2,000 $8,000 Investment B $12,000 Year Net Cash flow (S ) X Discount factor - Present Value (S) Total cash revenues $20,000 Average return $22,000 0.952 Less depreciation $4,000 0.00 $4,400 0.907 0.00 (straight line) $3.200 $3,200 2.000 0.864 1728 8,000 Average net revenue $800 $1.200 12,000 0.784 9402 Total 22,000 Question 57 (2 points) ess cost Cost What is the payback period for investment A? NPY 16,000 One Year Question 59 (3 points) What is the net present value of the cash flow in year four (refer to above table)? Two Years Notice, you will need to calc need to calculate the discount factor in year 4 in or in year 4 in order to calculate the present value. Choose the closest value, remember, does the answer pass the smell test? Four Years $658.20 Five Years $972.40 Question 58 (2 points) $6,582.00 What is the simple rate of return for investment B? $9,724.05 5.5% Question 60 (3 points) What is the net present value for Investment B (refer to above table)? 7.5% Oo 27.5% $1,712 $16,000 $17,712 Economic Principles Solve for the missing cells below. Assume corn sells for $3.00/bu. and the input cost no cell. is $0.60/unit. Note the last question in this section is related to the table yet there is Input Marginal Average Input Quantity Fertilizer Level Com Physical units/ac Physical Total Total Net Return 88 8288:888 bu./ac. Product Product Revenue Cost Profit Input Decision 50 - 288982888988 150.0 144.0 MVP MIC Output Decision MR 39 177.0 12.0 $3.00 201.0 18.0 165.0 $2 70 8 $0.67 $3.00 222.0 24.0 183.0 $2.40 $0.60 $2 10 $0.75 $3.00 198.0 $3.00 30.0 210.0 $0.60 $0.86 256.0 36.0 2190 $0.60 9 $1.50 $0.60 $3.00 $3.00 1.2 270.0 42.0 2820 48.0 6 228 0 $3 00 20 81 20 $0.60 $0.60 $1.20 1.1 288.0 5 $1.50 $3 00 291.0 234.0 $0.60 $3.00 231.0 $0.60 $3.00 09 288.0 60.0 $0.30 $0.60 $6.00 $3.00 -10 0.8 66.0 285.0 72.0 2220 213.0 -$0.30 SO.60 -$6.00 -$0.30 $0.60 -$6.00 $3.00 2820 78.0 204.0 $0.30 $0.60 -$6.00 $3.00 $3.00 Question 61 (2 points) Question 64 (2 points) Question 67 (2 points) What is the answer for cell 1? What is the answer for cell 4? What is the answer for cell 7? Question 70 (2 points) Your Answer: Your Answer: our Answer: Where does the profit maximizing level occur? Name the input level (number) Your Answer: Answe Answer units Answer Question 62 (2 points) Question 65 (2 points) Question 68 (2 points) Answer What is the answer for cell 2? What is the answer for cell 5? What is the answer for cell 8? Your Answer: Your Answer: Your Answer: Answer Answer Answer Question 63 (2 points) Question 66 (2 points) Question 69 (2 points) What is the answer for cell 3? What is the answer for cell 6? What is the answer for cell 9? Your Answer: Your Answer: Your Answer: Answer units