Business, 20.07.2021 03:20 rose80123

Mr. Agirich of Aggie Farms is considering the purchase of 100 acres of prime ranch land that is adjacent the ranch he now owns. Mr. Agirich can operate the additional 100 acres with present labor, machinery and breeding livestock. The land is selling for $400 per acre. Mr. Agirich believes that the operating receipts per acre of land per year will $450 and operating expenses will be $420 in present dollars. Mr. Agirich expects that the inflation rate will be 3% and operating receipts and expenses per acre will increase at the rate of inflation. The farmer will sell the land in three years and he anticipates that land prices will increase at the rate of inflation (from a base price of $400). A bank will loan him $350 per acre of land and the loan will be fully amortized over 15 years at 10% (annual payments). The outstanding balance of the loan will be paid at the end of the third year (balloon payment). Assume that the marginal tax rate is 30% and that Mr. Agirich requires at least a 6% pre-tax, risk-free return on capital and a 4% risk premium on projects of comparable risk. (Do the analysis on a per acre basis.) QUESTION 1
What is the annual real pre-tax Net Returns in the third year?
$30.00
$32.78
$22.95
$0
None of the above
QUESTION 2
What is the annual nominal pre-tax Net Returns in the third year?
$30.00
$32.78
$22.95
$0
None of the above
QUESTION 3
What is the annual nominal after-tax Net Returns in the third year?
$30.00
$32.78
$22.95
$0
None of the above
QUESTION 4
What is the nominal tax savings from depreciation?
$30.00
$32.78
$22.95
$0
None of the above
QUESTION 5
What is the nominal pre-tax terminal value in three years?
$400
$437
$425
$500
None of the above
10 points
QUESTION 6
What is the after-tax terminal value in three years?
$400
$437
$425
$500
None of the above
10 points
QUESTION 7
What is the accumulated depreciation over the three years?
$400
$437
$425
$500
None of the above
10 points
QUESTION 8
What is the after-tax risk adjusted discount rate?
7%
6%
5%
3%
None of the above
10 points
QUESTION 9
What is the present value of the after-tax net returns?
$400
$347.71
$6.12
$58.41
None of the above
10 points
QUESTION 10
What is the present value of tax savings from depreciation?
$400
$347.71
$6.12
$58.41
None of the above
10 points
QUESTION 11
What is the present value of after-tax terminal value?
$400
$347.71
$6.12
$58.41
None of the above
10 points
QUESTION 12
What is the Net Present Value?
$400
$347.71
$6.12
$58.41
None of the above
10 points
QUESTION 13
What is the annual loan payment?
$313.54
$46.02
$9.81
-$13.57
None of the above
10 points

Answers: 2

Show answers

Another question on Business

Business, 21.06.2019 16:10

You are at a holiday dinner with your family. your relative makes the argument that the u.s. economy is resurgent and has recovered from the great recession of 2007 – 2009. economic growth, as measured by gdp, has been increasing from one quarter to the next. you beg to differ. how would you structure your argument with your relative? hint: you should think about two things, the accuracy of gdp measures, and whether gdp should be considered a comprehensive measure of a countries well-being.

Answers: 3

Answer

Business, 21.06.2019 21:30

Mr. smith recently faced a choice between being (a) an economics profes-sor, which pays $60,000/yr, or (b) a safari leader, which pays $50,000/yr. after careful deliberation, smith took the safari job, but it was a close call. "for a dollar more," he said, "i'd have gone the other way."now smith's brother-in-law approaches him with a business proposition. the terms are as follows: - smith must resign his safari job to work full-time in his brother-in-law's business.- smith must give his brother-in-law an interest-free loan of $100,000, which will be repaid in full if and when smith leaves the business. (smith currently has much more than $100,000 in the the business will pay smith a salary of $70,000/yr. he will receive no other payment from the business.the interest rate is 10 percent per year. apart from salary considerations, smith feels that working in the business would be just as enjoyable as being an economics professor. for simplicity, assume there is no uncertainty regarding either smith's salary in the proposed business or the security of his monetary investment in it. should smith join his brother-in-law and, if so, how small would smith's salary from the business have to be to make it not worthwhile for him to join? if not, how large would smith's salary from the business have to be to make it worthwhile for him to join?

Answers: 1

Answer

Business, 22.06.2019 11:00

Aprofessional does specialized work that's primarily: degree based. medical or legal. well paying. intellectual and creative

Answers: 2

Answer

Business, 22.06.2019 22:00

The following table gives the map coordinates and the shipping loads for a set of cities that we wish to connect through a central hub.,(7,(4,(7,(6,(2,( 2,) for the location of the proposed new central hub, the coordinates should be near: x==) if the shipments from city a double, for the location of the proposed new central hub, the coordinates should be near: x==.926.865.017.21

Answers: 1

Answer

You know the right answer?

Mr. Agirich of Aggie Farms is considering the purchase of 100 acres of prime ranch land that is adja...

Questions