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You are offered a home solar energy system that costs $10,000 but saves you $1,000 a year. Would you buy it at this rate? If the cost were higher and the payoff time longer, what is the threshold at which you would not buy the system?
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- You are considering buying a condo as an investment property. The condo will generate $20,000 a year for 10 years in rent, after which you expect to sell the property for $275,000. What is the maximum you should pay for the property if your cost of money is 7%?Suppose you are contemplating buying a collector's edition of a John Maynard Keynes Action Figure. You would have to make a down payment today of $1,000 and then pay $1,875 at the end of two years from now (ie year 2). If you buy it today, a year from today ( ie year 1), you would sell the Action Figure for $2,750. Your minimum acceptable rate of return (MARR) is 20%. Find the positive breakeven interest rates on your potential investment. b. Determine whether this is a pure investment. (Use only one breakeven interest rate in your calculation – doesn't matter which one). C. Suppose you use the modified internal rate of return MIRR to evaluate investments. Calculate MIRR and determine if you should buy the Action Figure. (Note: use MARR when evaluating both cash inflows and cash outflows). d. Find the True IRR (You may assume that i is such that PB1 >0) and determine if you should buy the Action Figure.Suppose you want to buy a new house. You currently have $20,000, and you figure you need to have a 10% down payment plus an additional 5% in closing costs. If the type of house you want costs about $150,000 and you can earn 8.5% per year, how long will it be before you have enough money for the down payment and closing costs?
- You can purchase an equipment for $4,000. The equipment will provide benefits worth $900 a year. The expected life of the equipment is 8 years. It is expected that the price of the equipment will decrease by 15% per year. If the discount rate is 12%, would you buy the equipment today or will wait to purchase? When is the best time to purchase it? give excel file solutionYou bought an apartment. Its market value as of today is 150 000 zł. Each year you can get 15 000 zł for renting outthis apartment. In addition, each year, the market value of this apartment increases by 10 000 zł. An alternative to thisinvestment is to buy obligations, which will give 12.5% each year. After how many years will you sell the apartment?Suppose you have opened an MRI clinic and you are able to purchase a new MRI machine for $1 million. You plan to see 2000 patients per year, and you have determined that your MRI machine at that rate of use should last 10 years. Given a 5% rate of interest, use an annuity calculation to estimate the annual cost of an MRI per patient. Suppose that you could use the machine for 3 years and then sell it for $500,000. What would your annual cost per patient be in that case? Suppose you know that inflation is going to be 10% per year and that you will use the machine for 3 years and then be able to sell it for $800,000 (note that the $800,000 is measured in units of dollars 3 years from now). What then is your annual cost per patient and is your answer in dollars today or dollars three years from now?
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- You can purchase an equipment for $4,000. The equipment will provide benefits worth $900 a year. The expected life of the equipment is 8 years. It is expected that the price of the equipment will decrease by 15% per year. If the discount rate is 12%, would you buy the equipment today or will wait to purchase? When is the best time to purchase it?You are thinking of renovating a basement apartment beneath your house, which you currently rent out for $521 per month. If you renovate the apartment, you could get $729 per month instead, starting next month. Assume renovations would cost $10,000, paid immediately, and would take very little time to complete so there’d be no delay in rental income. Assume monthly rental income would last for the foreseeable future (aka forever). If the applicable discount rate is 6% per year, what is the net present value (NPV) of the renovations? Round to the nearest cent.You plan to buy a financial product today. You expect that the financial product will give you $100 at the end of first 5 years (that is, you receive $100 starting one year from today for 5 years). Your required rate of return is 10%. If this same financial product has an actual market price of $370, what is the expected rate of return E(r)? Should you buy this financial product? O 9.0076%; Don't Buy O 9.0076%; Buy O 10.9559%; Buy O 11.2276%; Don't Buy