buys bottles of water from the grocery store, but is now considenng the nvironmental ramifications of the waste. He is.considering getting a water iltration system in his home, but it will cost $1.000, which would mean he vould take out a small loan at 7% interest for one year. If bottled water costs 67 a week, what would be the difference in the costs after one year?

buys bottles of water from the grocery store, but is now considenng the nvironmental ramifications of the waste. He is.considering getting a water iltration system in his home, but it will cost $1.000, which would mean he vould take out a small loan at 7% interest for one year. If bottled water costs 67 a week, what would be the difference in the costs after one year?

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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A businessman bought a used building and found that the roof insulation was insufficient. He estimated that with 6 inches of foam insulation he could lower his heating bill by $25 a month and the cost of air conditioning by $20 a month. Assuming that the first six months of the year are winter and the next six are summer, how much can you afford to spend on insulation if you expect to have the building for only two years? Assume i=1 ½ % per month.
Gloria is planning on opening a cake shop. She has found a location that rents for $15,550 per year and it will cost her another $13,716 to furnish the shop and purchase all the necessary equipment. She plans on charging $20 for a cake and it will cost her $3 per cake for ingredients and $1.92 per cake for decorations and $1.59 per cake for the beautiful, colorful to-go boxes. What is the dollar breakeven point she will need to earn to cover her costs in the first year? Round to the nearest whole number.
A businessman bought a used building and found that the roof insulation was insufficient. He estimated that 6 inches of insulating foam could lower the heating bill by $25 per month and the cost of air conditioning by $20. Assuming that the first six months of the year are winter and the next six are summer, how much can you afford to spend on insulation if you expect to only have the building for two years? suppose i=1.5% per month
David has to buy four new tires for his SUV. The tires that he is considering cost $25 a piece more than his regular brand. These higher-priced tires are supposed to improve his mileage per gallon by 20%. Suppose that the tires last for 48,000 miles and that David drives an average of 1,000 miles per month and that gas will cost $2.50 per gallon for the next 4 years. If David's SUV currently gets 30 miles to the gallon now (on the old tires), should David purchase the more expensive tires? and Assume that a firm has earnings before interest and taxes (EBIT) of $375,000 and that it has interest expense of $75,000, must pay preferred dividends of $6,000 and has a tax rate of 40 percent. Given a base EBIT level of $375,000, what is the firm's degree of financial leverage?
If your vacation cabin had rainwater harvesting, you could use it more often. Your water utility charges you $25 per month for basic service and $10 in usage fees. You plan to own the cabin for 10 more years. The gutters, filtration system, and storage tank would cost $4,500 upfront. Because of your roof size, the catchment system would supply all the water you need, and you could disconnect from the water utility. 1. What is the IRR (write as a percentage)? 2. Is it a good idea (Yes or No, based on IRR)?
Tom is considering purchasing a $22400 car. After five years, he will be able to sell the vehicle for $8000. Petrol costs will be $2000 per year, insurance $600 per year, and parking $600 per year. Maintenance costs for the first year will be $1000, rising by $400 per year thereafter. The alternative is for Tom to take taxis everywhere. This will cost an estimated $6000 per year. Tom will rent a vehicle each year at a total cost (to year-end) of $600 for the family vacation, if he has no car. If Tom values money at 11 percent annual interest. What is the annual worth of buying a car? Should he buy a car? Enter YES or NO in the units box. Note: (Use a negative sign (-) for an overall cost)
You are the owner of a small hardware store, and you are considering opening a gardening store in a vacant area in the back of the store. You estimate that it will cost you $ 50,000 to set up the store and that you will generate $ 10,000 in after-tax cash flows from the store for the life of the store (which is expected to be 10 years). The one concern you have is that you have limited parking; by opening the gardening store, you run the risk of not having enough parking for customers who shop at your store. You estimate that the lost sales from such an occurrence would amount of $ 3,000 a year and that your after-tax operating margin on sales at the hardware store is 40%. If your discount rate is 14%, would you open the gardening store?
A friend wants to convert his used VW golf into a grease burning car. If he drives his car150miles a week and has a friend that can supply used vegetable oil at ~$2 per 5 gallons,how long will it take to pay for the system to convert and store the oil? Ignore depreciationand assume interest costs of 0%. How long would it take to pay for the system if he convertsall the oil to biodiesel before burning it in his car? List assumptions
Jim just got a coding job so he will need a new laptop. He finds a good one, which costs $20,000 and can be used for 6 years. After that, the computer will be useless with zero salvage value due to a massive coding work. Jim has insufficient money to buy it, but he can borrow funds at an annual interest rate of 2.5%. The tax rate is 28%. The store said if Jim chooses to lease the laptop, Jim will pay for $3,500 per year (pre-tax). What is the amount of the after- tax lease payment? a) $1,067.5 b) $2,520 c) $980 d) $87.5 e) $14,400
Joe's Taco Hut can purchase a delivery truck for $20,000, for which he will take out a loan from the bank. He estimates it will generate a net income (after taxes, maintenance, and operating costs) of $4,000 per year. His other option is to go to work for someone else earning net income of $3,000 per year. Assume that Joe can resell the truck for the entire purchase price of $20,000. What is the VMP for the delivery truck (Joe's MB if he buys it)? Please enter your answer as a numerical response and do not type out your answer as words (ie. $3000 not "Three thousand dollars"). Will Joe buy the delivery truck if the interest rate is 3%? Simply type either "Yes" or "No" into the answer box Will Joe buy the delivery truck if the interest rate is 7%? Simply type either "Yes" or "No" into the answer box What is the highest interest rate Joe would be willing to pay? Please enter your answer as a numerical response and do not type your answer as words (ie. 3% not Three percent").
The owner of a small local flea market rents tables to vendors every Sunday. His only expense is the purchase of the building in which the flea market operates at a cost of $450,000. The owner expects to rent about 20 tables per week (1000 per year), and wishes to receive a 12% annual return on his investment in the building. What gross margin (in dollars) should the owner use?
A dairy owner is deciding whether or not to invest in new milk machines. The cost of the machines is $100,000. If she purchases the machines, the dairy will earn $30,000 in the first year, $50,000 in the second year, and $60,000 in year 3. What is the NPV of the investment? (Rounded to the nearest whole dollar)

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