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1.Mutually exclusive projects Projects A and B of equal risk, are alternatives for expanding Rosa Company's capacity. The firm's cost of capital is 12% The cash flow shown in the following table a. Calculate each project's payback period b. Calculate the net present value (NPV) for each project c. Calculate the internal rate of return (IRR) for each project d. Indicate which project you would recommend a. The payback period of project Ais years (Round to two decimal places) The payback period of project Bis years (Round to two decimal places) b. The NPV of project A is $(Round to the nearest cent) The NPV of project Bis $ (Round to the nearest cent) c. The IRR of project is % (Round to two decimal places) Click to select your answer(s)
a. The payback period of project Ais years. (Round to two decimal places.) The payback period of project Bis years. (Round to two decimal places.) b. The NPV of project Ais $. (Round to the nearest cent.) The NPV of project B is $. (Round to the nearest cent.) C. The IRR of project Ais %. (Round to two decimal places.) The IRR of project B is %. (Round to two decimal places.) d. Which project will you recommend? (Select the best answer below.) O A. Project B B. Project A Click to select your answer(s).
i Data Table ? m's cc (Click on the icon located on the top-right corner of the data table below in order to copy its contents into a spreadsheet.) Project A $60,000 Project B $30.000 an Initial investment (CF) Year (1) 1 2 3 4 5 Cash inflows (CF) $10,000 $10,000 $15.000 $10,000 $20,000 $10,000 $25,000 $10,000 $30,000 $10,000
2.After examining the various personal loan rates available to you, you find that you can borrow funds from a finance company at 13 percent compounded quarterly or from a bank at 14 percent compounded monthly. Which alternative is more attractive? If you can borrow funds from a finance company at 13 percent compounded quarterly, the EAR for the loan is %. (Round to two decimal places.)
3.How does a central bank mange Balance of Payments (BOP) deficit or surplus?
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2.Effective Annual rate of Finance company (13% compounded quarterly ) = 13.65%
Effective Annual rate of Bank (14% compounded monthly ) = 14.93%
Hence the rate of Finance Company is more attractive.
PLEASE SEE THE ATTACHED FILE.
3.Balance of Payment Deficit is the scenerio in which the imports of the country are higher than the total exports. This means that more and more currency is paid to the foreign countries from where the goods and services are imported. In this situation the person or company which imports goods from the foreign country will have to pay of the money also in the foreign currency. In such a situation we will have to borrow from the foreign countries to pay off the foreign suppliers of goods and services
As the imports will be higher the need to pay the suppliers in the foreign currency will lead to higher demand for foreign currency which leads to higher fluctuation of the exchange rate. As the demand is high there should be equivalent supply of foreign currency also because when the foreign currency moves outwards there is shortage of foreign exchange reserves. In order to tackle this situation the central bank will intervene and will sell the foreign exchange to increase the foreign exchange flow and buy domestic currency. In this way the demand and supply of foreign reserves will be continuous.
Balance of Payment Surplus is the scenerio in which the exports of the country are higher than the total imports. This means that more and more currency is paid to the domestic supplier from where the goods and services are exported to foreign country. In this situation the country which imports goods from the domestic market will have to pay of the money also in the domestic currency. In such a situation there will be additional foreign exchange reserves and the central bank intervenes to buy the foreign currency and sell the domestic currency.
