Finacial

Appendix 2
Answers to selected end-of-chapter questions and problems

Chapter 1

7. a.

|Proposal |% return |
|1 |20 |
|2 | 5 |
|3 | 7.5 |
|4 | 9 |
|5 | 12.5 |
|6 | 7.5 |

Thus, the firm will only invest in Proposals 1 and 5.

b. hitch 1: $60 000; finish 2: $46 500

c. Period 1: $6; Period 2: $4.65

d. Period 1 : $12 000
Period 2 : $9300

e. Period 1: $15 909.09; Period 2: $5000

f. The P1 dividend ($12 000) is more than desired, so the excess $2000 (12 000 10 000) will be invested in the market, with the publication (2000 × 1.10 = 2200) being consumed in P2. Therefore, maximum consumption in Period 2: $11 500

9.a.There is a $lm spend constraint. It is not good enough to rank the individual labor movements in order of return and then accept them in order. You pick out to look at all the possible combinations of projects whose combined disbursal is less than or equal to $lm, and select the combination with the highest NPV.





However, a quick calculation of NPVs may reveal a project not even worth considering:

| |Outlay |Present value of Expected Cash |NPV |
|Project | |Flows | |
|1 |$500 000 |$610 000 |$ cx 000 |
|2 | 150 000 | 142 500 | (7500) |
|3 | 350 000 | 420 000 | 70 000 |
|4 | 450 000 | 531 000 |...If you want to get a full essay, order it on our website: Orderessay



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