In anticipation of the immense college expenses of their child, a couple has started an annual investment program on the child's eighth birthday that will last until the eighteenth birthday. Judging from their expected financial position over the next 10 years, the couple estimates that they will be able to invest the following amounts at the beginning of each year Year 1 2 3 4 5 6 7 8 9 10
Amount ($1000) 20 20 25 25 30 35 35 40 40 50
To avoid unpleasant surprises, the couple opts to invest the money very safely. The following options are open to them:
Insured savings with 7.5% annual yield.
Six-year government bonds that yield 7.9% and have a current market price equal to .98 face value.
Nine-year municipal bonds yielding 8.5% and having a current market price equal to 1.02 face value (you pay $1.02 to buy the bond worth $1).
How should the couple invest the money over the next 10 years? (Hint: more than $460K)

Fanning company is considering the addition of a new product to its cosmetics line. the company has three distinctly different options: a skin cream, a bath oil, or a hair coloring gel. relevant information and budgeted annual income statements for each of the products follow. skin cream bath oil color gel budgeted sales in units (a) 110,000 190,000 70,000 expected sales price (b) $8 $4 $11 variable costs per unit (c) $2 $2 $7 income statements sales revenue (a × b) $880,000 $760,000 $770,000 variable costs (a × c) (220,000) (380,000) (490,000) contribution margin 660,000 380,000 280,000 fixed costs (432,000) (240,000) (76,000) net income $228,000 $140,000 $204,000 required: (a) determine the margin of safety as a percentage for each product. (b) prepare revised income statements for each product, assuming a 20 percent increase in the budgeted sales volume. (c) for each product, determine the percentage change in net income that results from the 20 percent increase in sales. (d) assuming that management is pessimistic and risk averse, which product should the company add to its cosmetics line? (e) assuming that management is optimistic and risk aggressive, which product should the company add to its cosmetics line?

Why entrepreneurs start businesses. a) monopolistic competition b) perfect competition c) sole proprietorship d) profit motive

Anew firm is developing its business plan. it will require $615,000 of assets, and it projects $450,000 of sales and $355,000 of operating costs for the first year. management is reasonably sure of these numbers because of contracts with its customers and suppliers. it can borrow at a rate of 7.5%, but the bank requires it to have a tie of at least 4.0, and if the tie falls below this level the bank will call in the loan and the firm will go bankrupt. what is the maximum debt ratio the firm can use? (hint: find the maximum dollars of interest, then the debt that produces that interest, and then the related debt ratio.)a. 41.94%b. 44.15%c. 46.47%d. 48.92%e. 51.49%