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You are trying to choose between two different investments, both of which have up front costs of $65,000. Investment M returns $135,000 in six years. Investment N returns $195,000 in 10 years. Which of these investments has a higher return?

You receive a credit card application offering an intro rate of 2.4% per year, compounded monthly for the first six months, and then increasing to 18% compounded monthly. Assuming you transfer $6,000 from another card and make no subsequent payments, how much interest will you owe at the end of the first year?

Suppose Subaru of America, Inc. wishes to borrow money from UBS. They agree on an annual rate of 10%.

1. Suppose Subaru agrees to repay $500 million at the end of 4 years. How much will UBS lend Subaru?
2. Suppose Subaru agrees to repay a total of $500 million at a rate of $125 million at the end of each of the next 4 years. How much will UBS lend Subaru?

Banerjee Company expects to receive $200 at the end of the next 5 years and an additional $1,000 at the end of the fifth year. Therefore, the total payments will be $2,000. What is the NPV of the payments at an interest rate of 8%?

The city of Castle Rock signed a lease for a photocopy machine at $2,500 per month and $.02 per copy. Operating costs for toner, paper, operator salary, and so on are all variable at $.03 per copy. Departments had projected a need for 100,000 copies a month. The city planning department predicted its usage at 36,000 copies a month. It made 42,000 copies in August.

1. Suppose one predetermined rate per copy was used to allocate all photocopy costs. What rate would be used and how much cost would be allocated to the city planning department in August?
2. Suppose fixed and variable cost pools were allocated separately. Specify how each pool should be allocated. Compute the cost allocated to the city planning department in August.
3. Which method, the one in number 1 or number 2, do you prefer? Explain.

Koskos, Inc. produces and sells lawn mowers for $220 each. The variable costs of each mower total $160 while total monthly fixed costs are $24,000. Current monthly sales are $99,000. The company is considering a proposal that will increase the selling price by 10%, increase total fixed costs by 10% and increase unit sales to 500 units per month.

a) Compute the company s current break even point in units and dollars.

b) What is the company s current margin of safety in units, dollars, and percentage?