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Engineering Economy 7th Edition by Leland Blank ,Anthony Tarquin
Edition 7ISBN: 978-0073376301Engineering Economy 7th Edition by Leland Blank ,Anthony Tarquin
Edition 7ISBN: 978-0073376301 Exercise 47
Two friends each invested $20,000 of their own (equity) funds. Stan, being more conservative, purchased utility and manufacturing corporation stocks. Theresa, being a risk taker, leveraged the $20,000 and purchased a $100,000 condo for rental property. Considering no taxes, dividends, or revenues, analyze these two purchases by doing the following for one year after the funds were invested.
a) Determine the year-end values of their equity funds if there was a 10% increase in the value of the stocks and the condo.
b) Determine the year-end values of their equity funds if there was a 10% decrease in the value of the stocks and the condo.
c) Use your results to explain why leverage can be financially risky.
a) Determine the year-end values of their equity funds if there was a 10% increase in the value of the stocks and the condo.
b) Determine the year-end values of their equity funds if there was a 10% decrease in the value of the stocks and the condo.
c) Use your results to explain why leverage can be financially risky.
Explanation
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Profit or loss earned in a year is added...
Engineering Economy 7th Edition by Leland Blank ,Anthony Tarquin
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