BUSINESS COLLEGE

9.5 Capital Healthplans Inc. is evaluating two different methods for providing home health services to its members. Both methods involve contracting out for services, and the health outcomes and revenues are not affected by the method chosen. Therefore, the net cash flows for the decision are all outflows. Here are the projected flows:Year Method A Method B0 (300,000) (120,000)1 (66,000) (96,000)2 (66,000) (96,000)3 (66,000) (96,000)4 (66,000) (96,000)5 (66,000) (96,000)a. What is each alternative’s IRR? b. If the opportunity cost of capital for both methods is 9 percent, which method should be chosen? Why?

Answers

Answer 1
Answer:

Answer:

present worth A: 513,821.51

present worth B:   431,013.1

We should choose option B as the present worth is lower.

the IRR cannot be calculated when all teh cashflow are negative as it the rate which makes the present value equal to zero. that means it will discount either the negative or postive subsequent cashflow to match an initial of the opposite sign.

Explanation:

For the intenal rate of return we must look for which rate makes the cost equal to zero.

For the opportunity cost, we solve for the present value of eahc discounted at the given rate of 9%

Method A

(Maturity)/((1 + rate)^(time) ) = PV  

discount rate 0.09

# Cashflow Discounted

0 300000         300000

1   66000           60550.46

2   66000           55550.88

3   66000           50964.11

4   66000           46756.06

NPV           513821.51

Method B

# Cashflow Discounted

0 120000 120000

1 96000 88073.39

2 96000 80801.28

3 96000 74129.61

4 96000 68008.82

NPV 431013.1

Related Questions

An Engel curve:________. A. slopes upward for normal goods and downward for inferior goods. B. slopes upward for inferior goods and downward for normal goods. C. slopes downward for both normal and inferior goods. D. slopes upward for both normal and inferior goods.
Lacy's Linen Mart uses the average cost retail method to estimate inventories. Data for the first six months of 2021 include: beginning inventory at cost and retail were $64,500 and $123,000, net purchases at cost and retail were $315,000 and $483,000, and sales during the first six months totaled $493,000. The estimated inventory at June 30, 2021, would be:
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Many different project life cycle models are used for different types of projects, such as information systems, improvement, research and development, and construction. Select one:True False

Girls between the ages of 8 and 15 are one of the growing markets for high-end shoe manufacturers, and podiatrists say the trend is leading to many stylish young girls with grown-up foot problems. To many parents and podiatrists, shoe manufacturers who develop and market adult-styled shoes to this group are not operating at a(n) _____ responsibility level.

Answers

Answer:

Shoe manufacturers are not operating at an corporate social responsibility level.

Explanation:

Corporate social responsibility is that kind of business model which is self regulating in the nature. This is also know as corporate citizenship , according to this model company's try to operate their business in such ways that do no harm to the environment or negatively affect the society but here the motto of the company's are to enhance the society, environment , and the customer satisfaction. Company's working on this approach try to be accountable for their actions towards the consumer and society . In this question shoe manufacturers are not operating at an corporate social responsibility level.

Answer: Ethical

Explanation: The shoe manufacturers who develop and market adult-styled shoes to this group are not operating at an ethical responsibility level of the pyramid of corporate social responsibility. The ethical aspect deals with going to great extents across legal requirements to meet the expectations of society. Social responsibility is the duty of business to do no harm to society. In other words, in their daily operations, the shoe makers were not concerned about the welfare of their customers and were not mindful of how their actions affected them later on. Therefore, they weren't operating at an ethical level.

On May 1, 2016, Varga Tech Services signed a $6,000 consulting contract with Shaffer Holdings. The contract requires Varga to provide computer technology support services whenever requested over the period from May 1, 2016, to April 30, 2017, with Shaffer paying the entire $6,000 on May 1, 2016.How much revenue should Varga recognize in 2016? (Do not round intermediate calculation.)

Answers

Answer:

Varga should recognize $4,000 as revenue in 2016.

Explanation:

As the cash received in advance is recorded as unearned revenue which is a liability for the Varga Tech Services because they did not provide the services yet. On  December 31,  Eight months have passed and services for these month has been provided. So the revenue of 8 month months of 2016 will be recognized and recorded at year end.

Serive Contract = $6,000 for 12 months

Revenue Recognized in 2016 = $6,000 x 8/12 = $4,000

Nora is interested in a career in human resource management. She expected her first job to focus on giving employees access to information and enrollment forms for training, benefits, and other programs. However, she has since learned that HR employees spend less time doing that kind of work. Which trend is behind that change

Answers

Answer:

employees can now get such information through self-service

Explanation:

The trend behind this change is that, employees can now get such information through self-service. Human resource Employees spend less time doing such work now because such information is readily available on the internet and can be accessed by any employee at anytime that they want to do so on their own.

On June 1, 2014, Siebens Enterprises loaned $27,000 to Tyler Company for one year at 8 percent interest. Under the terms of the promissory note, Tyler will repay the principal and pay one year's interest on May 31, 2015. Related to this note receivable, what amount of interest income would Siebens report on its 2014 income statement? (Round your final answer to the nearest whole dollar amount.)

Answers

Answer:

$1,260

Explanation:

The computation of amount of interest income is shown below:-

Principal                                    $27,000

Rate of interest                          8%

Interest for 7 month in 2014     $1,260

($27,000 × 8% × 7 ÷ 12)

Interest for 5 months in 2015   $900

( $27,000 × 8% × 5 ÷ 12)

12 months from 1 June 2014  

to 31 may 2015                            12 months

Interest                                         $2,160

($27,000 × 8%)

T will repay the principal and one year interest  

on may 31, 2015

($20,000 + $2,160)                        $22,160

So, Interest income to be reported on its 2014 income statement is $1,260

Supply and demand for a product are both a linear function of price. Suppose that if a price of $8 is charged, 8 units will be demanded; that if a price of $5 is charged, 20 units will be demanded; that if a price of $3 is charged, 38 units will be supplied; and that if a price of $1 is charged, 26 units will be supplied. For what price will supply equal demand?

Answers

Answer:

At $2 supply and demand are in equilibrium for 32 quantity

Explanation:

We have to solve for the linear equation first, and then calcualte the equilibrium price and quantity

m = (y_1- y_2)/(x_1-x_2)

Demand

\left[\begin{array}{cc}x&y&5&20&8&8\end{array}\right]

m = (20- 8)/(5-8) = 12/ -3 = -4

Then we solve for h

20 = -4*5 + h \n 20+20 = h \nh = 40

Demand would be y = -4x +40

We repeat the process with supply

\left[\begin{array}{cc}x&y&1&26&3&38\end{array}\right]

m = (38- 26)/(3-1) = 12/ 2 = 6

38 = 6*3 + h \n 38 -18 = h \nh = 20

Supply is y = 6x + 20

Now we can solve for equilibrium price

\left \{ {{y = -4x +40} \atop {y = 6x + 20}} \right.

-4x + 40 = 6x + 20

20 = 10x

x = 20/ 10 = 2 price

And quantity

6 x 2 + 20 = 32

-4x2 + 40 =  32

Marion Inc. has 5,000 shares of 5%, $100 par value, noncumulative preferred stock and 20,000 shares of $1 par value common stock outstanding at December 31, 2018. There were no dividends declared in 2017. The board of directors declares and pays a $65,000 dividend in 2018. What is the amount of dividends received by the common stockholders in 2018

Answers

Answer:

The amount of dividends received by the common stockholders in 2018 is $40,000

Explanation:

Number of shares = 5000 shares

Outstanding shares = 20,000 shares

The board of directors declares and pays a $65,000 dividend in 2018

The amount of dividends received by the common stockholders in 2018

= $65,000 - dividend paid to preferred stocks

Where, dividend paid to preferred stocks  = 5,000 × 5% × $100

= $25,000

Therefore, we have;

=$65,000 - $25,000 = $40,000
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