Explore BrainMass

Finance Problems (Fixed costs, Net present value, yield to m

Below is a wide range of Finance problems. There are a total of 8 problems. Please show all work so I can get an understanding of how you solved each problem.

1.) Dominic's Italian Cafe sells pizzas at $18.00 each. Fixed costs total $12,000 per month and Dominic's variable costs total $6.00 per pizza. Calculate the breakeven point in pizzas per month for Dominic's.

2.) At the end of January, your company had an inventory of 825 units, which cost $12 per unit to produce. During February the company produced 75 units at a cost of $16.00 per unit. If your firm sold 1,050 units in February, what is your cost of goods sold: A. assuming LIFO inventory accounting and B. assuming FIFO inventory accounting?

3.) Your company decides to issue $1,000 par value 12% bonds. Compute the current price of the bonds if the percent yield to maturity is A. 8% or B. 18%.

4.) If you save $1,500 per year how much will you have in A. 7 years at 10% annual interest and B. 15 years at 12% annual interest?

5.) What is the present value of lottery prize of $1,000,000 payable in 20 annual installments of $50,000 each assuming a discount rate of 12%?

6.) You accepts a job and the company is willing to pay you a sign on bonus and you must choose between 3 alternative payment plans: Plan A - $30,000 payable today, Plan B- $4,000 payable 3 years from today or Plan C, annual payments of $1,225 each with the 1st payments 1 year from today. Assuming a discount rate of 8%. Which bonus should you accept?

7.) You are considering the purchase of a new machine that would increase the speed of manufacturing and save money. The net cost of this machine is $66,000. The annual cash flows have the following projections: Year 1: $21,000, Year 2: $29,000, Year 3: $36,000, Year 4: $16,000 and Year 5 $8,000. A. What is the payback period? B. If the cost of capital is 10%, what is the net present value?

8.) You must choose between two bonds. Bond A pays $90 annual interest and has a market value of $850. It has 10 years to maturity. Bond B pays $80 annual interest and has a market value of $900. It has 2 years to maturity. A. Computer the current yield on both bonds. B. Compute the yield to maturity on both bonds.

Please show all work so I can understand how you solved the problem. Answers on an Excel worksheet is fine. Thank you.

© BrainMass Inc. brainmass.com June 19, 2018, 10:20 am ad1c9bdddf

Solution Preview


I hope you are doing well. Please see my response ...

Solution Summary

The solution does a superb job of laying out step by step explanation to the problem. The solution is very well explained and uses detailed steps to explain the answer. The solution can be followed by anyone with a basic understanding of the concepts. Overall, an excellent response.