Week_1_Solutions

# Week_1_Solutions - Question 3 Solution Today \$5,000 In one...

This preview shows pages 1–4. Sign up to view the full content.

This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document

This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: Question 3 Solution Today \$5,000 In one year \$5,700 Rate= 14.00% =+C5/C4 -1 =(C5-C4)/C4 Check In one year = \$5,700 =+C4 * (1+C7) Wylie has been offered the choice of receiving \$5,000 today or an agreed-upon amount in 1 year. While negotiating the future amount, Wylie notes that he would be willing to take no less than \$5,700 if he has to wait a year. What is his TVOM in percent? Question 4 Should they be able to successfully negotiate the terms of this loan? Solution RT Loans \$20,000.00 RT's TVOM rate 12.00% Minimum Interest by RT \$2,400.00 =C7*C8 Cynthia Borrrows= \$20,000.00 Cynthia's TVOM= 8.00% \$1,600.00 =C12*C11 \$2,000.00 10.00% There is a 2% rate of return that equals \$400 difference to making a deal. Rate Amount RT 12% \$2,400 Cynthia 10% \$2,000 Difference 2% \$400 RT is about to loan his granddaughter Cynthia \$20,000 for 1 year. RT's TVOM , based upon his current investment earnings, is 12 percent, and he has no desire to loan money for a lower rate. Cynthia is currently earning 8 percent on her investments, but they are not easily available to her, and she is willing to pay up to \$2,000 interest for the 1-year loan. If so, what range of paybacks would be mutually satisfactory? If not, how many dollars off is each person from reaching an agreement? Cynthia's Earnings using her earnings rate Maximum Interest Cynthia willing to pay Maximum Rate Cynthia willing to pay A comprimise might be at 11% or \$2,200 in interest. It depend on how anxious each is to deal. Question 5 Remembering that no stages can be skipped, which set of the five stages do you recommend be performed? Stage Investment 1 \$180,000 \$270,000 2 \$30,000 \$50,000 3 \$40,000 \$30,000 4 \$30,000 \$60,000 5 New control console \$15,000 \$5,000 Solution STAGE Investment Stage Revenues Costs Cumulative Net 1 Station \$270,000 \$180,000 \$90,000 \$270,000 \$180,000 \$90,000 2 Antenna \$50,000 \$30,000 \$20,000 \$320,000 \$210,000 \$110,000 3 Amplier \$30,000 \$40,000 (\$10,000) \$350,000 \$250,000 \$100,000 4 Lightning Protection \$60,000 \$30,000 \$30,000 \$410,000 \$280,000 \$130,000 Largest 5 Control Console \$5,000 \$15,000 (\$10,000) \$415,000 \$295,000 \$120,000 The following stages of a project are each contingent upon the preceding stage. If the preceding stage is not performed (accepted), then none of the subsequent stages may be performed. Cost in Today's \$ Revenues in Today's \$ A small FCC-licensed commercial radio station New antenna and hard- line from transmitter New amplifier to boost from 5,000 watts to 30,000 watts New lightning- protection equipment Net: Revenues minus Costs Cumulative Revenues Cumulative Costs Perform internally the first four stages. Note that this gives the highest accumulated total net revenue-cost. Note that the amplifier does not pay out, but it is necessary for the lightning protection that pays out nicely Question 6...
View Full Document

## This note was uploaded on 02/15/2012 for the course MBA 101 taught by Professor X during the Spring '11 term at Shawnee.

### Page1 / 9

Week_1_Solutions - Question 3 Solution Today \$5,000 In one...

This preview shows document pages 1 - 4. Sign up to view the full document.

View Full Document
Ask a homework question - tutors are online