Answer:
The Internal Rate of Return (IRR) assesses how profitable the capital that remains invested across the duration of a project is. It is also recognized as the discount rate that brings the Net Present Value (NPV) to zero. Therefore, if employing the IRR leads us to zero for the NPV, it implies the project neither creates nor destroys value.
The required rate of return signifies the minimum expected return an investor anticipates when committing to a project.
If investment in both projects remains throughout their lifespan, both could work well for the investor. However, as they are mutually exclusive, a choice must be made. If project B’s investment is held throughout its duration, it will possess a greater internal rate of return, thus suggesting its selection. Nevertheless, it is wise to evaluate additional financial indicators, as the IRR assumes reinvestment of all earnings into the same project, which may not reflect reality where returns might not be reinvested at the same rate.
The attached figure illustrates the IRR formula. However, I computed it through Excel: initially, I documented the cash flows for each year (the first being negative due to initial investment). I then applied the formula: "=IRR(D5:C8)" for project A and "=IRR(E5:E8)" for project B.
The opportunity cost amounts to $532,000. This represents the cost of the most preferable alternative that was not selected. In this case, rejecting the investment project meant foregoing the potential return of $532,000.
Answer:
15.18%
Explanation:
To calculate the nominal annual rate
The first step is to determine EFF% with this formula
EFF% = [1 + (Nominal rate percentage/Number of months in a year)]^Number of months in a year
Let's substitute into the formula
EFF% = [1 + (15%/12)]^12
EFF% = (1 + 0.0125)^12
EFF% = (1.0125)^12
EFF% = 1.1608 × 100%
EFF% = 116.08%
The second step is to find Rnom for quarterly compounding at 116.08% using this formula
Rnom compounding quarterly = (1 + (R/4))^4
Let's plug into the formula
Rnom compounding quarterly = (116.08%)^(1/4) Rnom compounding quarterly = 1 + R/4
Thus,
Rnom compounding quarterly = 15.18%
Therefore, Anne Lockwood should offer her customers a nominal rate of 15.18% compounded quarterly
Answer:
This question lacks options. Here are the available ones:
a) Partnership
b) C Corporation
c) S Corporation
d) Limited Liability Company
e) Limited Liability Partnership
The correct answer is option D: Limited Liability Company.
Explanation:
The term "Limited Liability Company" describes a type of business structure in business law that is beneficial for owners, offering specific characteristics. This form integrates features of both corporations and partnerships, allowing flexibility depending on the owner's situation. It's important to note that a significant aspect of this form is that the owner's personal assets are protected from company liabilities.
