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