a. Peter is 28 years old and is considering full-time study for a Master of Science...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
a. Peter is 28 years old and is considering full-time study for a Master of Science (MSc) degree. Tuition and other direct costs will be $22,000 per year for three years. In addition, Peter will have to give up a job with a salary of $42,000 per year. However, if Peter goes on for three more years of graduate study, Peter can increase his earnings to $47,000 per year. Assume that the salary increase is a constant real amount that starts after he complete his degree at the end of the year following graduation and lasts until retirement at age 65. Also assume a real interest rate of 4% per year and ignore taxes. Assume tuition is paid and salary received at the end of the year. Should Peter accept this MSc degree investment? [10 marks] b. Proton, Inc., is considering two projects. Each requires an initial investment of $100,000. John Proton, president of the company, has set a maximum payback period of 4 years. The after-tax cash inflows associated with each project are shown in the following table. Year 1 2 3 4 5 Cash inflows (CF) Project A $10,000 20,000 30,000 40,000 20,000 Project B $40,000 30,000 20,000 10,000 20,000 Compute the payback period of each project. Which should the company invest in, firstly, what if the projects are independent? Secondly, what if the projects are mutually exclusive? Please support your recommendations of project investment with own interpretations. [10 marks] a. Peter is 28 years old and is considering full-time study for a Master of Science (MSc) degree. Tuition and other direct costs will be $22,000 per year for three years. In addition, Peter will have to give up a job with a salary of $42,000 per year. However, if Peter goes on for three more years of graduate study, Peter can increase his earnings to $47,000 per year. Assume that the salary increase is a constant real amount that starts after he complete his degree at the end of the year following graduation and lasts until retirement at age 65. Also assume a real interest rate of 4% per year and ignore taxes. Assume tuition is paid and salary received at the end of the year. Should Peter accept this MSc degree investment? [10 marks] b. Proton, Inc., is considering two projects. Each requires an initial investment of $100,000. John Proton, president of the company, has set a maximum payback period of 4 years. The after-tax cash inflows associated with each project are shown in the following table. Year 1 2 3 4 5 Cash inflows (CF) Project A $10,000 20,000 30,000 40,000 20,000 Project B $40,000 30,000 20,000 10,000 20,000 Compute the payback period of each project. Which should the company invest in, firstly, what if the projects are independent? Secondly, what if the projects are mutually exclusive? Please support your recommendations of project investment with own interpretations. [10 marks]
Expert Answer:
Related Book For
Corporate Finance
ISBN: 978-0077861759
10th edition
Authors: Stephen Ross, Randolph Westerfield, Jeffrey Jaffe
Posted Date:
Students also viewed these finance questions
-
Managing Scope Changes Case Study Scope changes on a project can occur regardless of how well the project is planned or executed. Scope changes can be the result of something that was omitted during...
-
The following additional information is available for the Dr. Ivan and Irene Incisor family from Chapters 1-5. Ivan's grandfather died and left a portfolio of municipal bonds. In 2012, they pay Ivan...
-
The Crazy Eddie fraud may appear smaller and gentler than the massive billion-dollar frauds exposed in recent times, such as Bernie Madoffs Ponzi scheme, frauds in the subprime mortgage market, the...
-
Solutions to which of the following categories of modeling techniques indicate a course of action to the decision maker? Group of answer choices Preventive models Predictive models Descriptive models...
-
What do you feel is the relationship between personal ethics and business ethics? Are they or should they be the same?
-
A thumbtack is dropped on a concrete floor. Assume that the thumbtack can land only point up (u) or point down (d), as shown in the figure below. If two thumbtacks are dropped, one after the other,...
-
A 20-lb weight is dropped from rest at a height of \(h=3 \mathrm{ft}\) onto end \(A\) of the \(\mathrm{A} 992\) steel cantilever beam. If the beam is a W16 \(\times 50\), determine the maximum...
-
NIU Company has the following information available for September 2010. Unit selling price of video game consoles ........$ 400 Unit variable costs ..................$ 270 Total fixed costs...
-
Instructions: After viewing the videos as many times as you wish, and reading the case, there are discussion topics for you to think about.Post your responses to each topic. Links: 1....
-
Judy Ericsdotter, the new marketing manager for Adaptive Wear (AW), a retailer of adaptive clothing for individuals with reduced mobility, recently proposed to the board that the company create a new...
-
Consider the following code: Initial begin clock = 1'b0; repeat (30) # 10 clock = -clock end The total duration of this code is expected to be ? Select one: O a. 30 time steps. O b. 50 time step. O ....
-
Compare and contrast the different memory technologies discussed in this chapter as they pertain to embedded real - time systems.
-
What does the term unsubstantiated bug mean? What should analysts do when an unsubstantiated bug is found?
-
In general terms, suggest a possible scheme that would allow a machine - language instruction to be interruptible. What would be the overall effect on instruction s execution time and CPU s...
-
What is system support?
-
You are designing the architecture of a high - performance CPU for hard real - time applications. List and justify the principal architectural selections that you would make.
-
Assume you have a product with the following parameters: Demand = 360 Holding cost per year = $1.00 per unit Order cost $100 per order Assume a 300-day work year What is the total cost for the...
-
In Exercises discuss the continuity of each function. f(x) -3 1 x - 4 y 3 2 -1 -2 -3+ 3 X
-
Given the information for Annas Tennis Shop, Inc., in the previous two problems, suppose you also know that the firms net capital spending for 2012 was $945,000 and that the firm reduced its net...
-
Mark Weinstein has been working on an advanced technology in laser eye surgery. His technology will be available in the near term. He anticipates his first annual cash flow from the technology to be...
-
An investment project has annual cash inflows of $ 5,000, $ 5,500, $ 6,000, and $ 7,000, and a discount rate of 14 percent. What is the discounted payback period for these cash flows if the initial...
-
In May 2023 Bernard, a self-employed plumber, and his son Gerald, a self-employed electrician, purchased 1,000 empty barrels from a Scottish whisky distillery. The barrels were over 100 years old and...
-
Three brothers, Daniel, David and Derrick have been discussing their respective taxation affairs and how much they dislike paying tax. None of them are Scottish taxpayers. Daniel's income for tax...
-
On 6 August 2023, Danh (who is not a Scottish taxpayer) commenced self-employment as a sole trader. In addition, on 6 September 2023, he joined an existing partnership run by Ebele and Fai. The...
Study smarter with the SolutionInn App