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Essay / Research Paper Abstract
A 3 page paper in two parts. The first considers the present value of a gold mine expected to be exhausted in two years' time; the second addresses the issue of whether the bonds of GM or Cisco Systems are the more attractive. It appears that GM is doggedly clinging to being what it wants to be, rather than providing products its customers truly want. Cisco is expanding its traditional reach without abandoning its traditional markets, and finding positive results. Cisco is the better choice for bond purchase. Bibliography lists 4 sources.
Page Count:
3 pages (~225 words per page)
File: CC6_KSacctPV.rtf
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Unformatted sample text from the term paper:
The gold mine is nearly depleted, but expected profits for the next two years is still attractive. With a 7% discount rate, the present value of the anticipated
$335,000 in total profits over two years is $299,015. The following table provides the present value for each year. 7%
Discount Expected Profit Present Value Year 1 0.9346 $ 105,000 $ 98,133 Year 2 0.8734 230,000 200,882 Total Value $ 335,000 $ 299,015
Part B At a discount rate of 7%, the gold mine could be sold for anything over
$300,000 and still return a profit. I would be willing to sell it for about $310,000, maximizing profit while still keeping the price low enough to attract a buyer
looking for a short-term mining business. Part C If interest rates and inflation were going to go up in the next two years,
I would be willing to accept a lower price. Increasing inflation will diminish the total value of expected profits and increasing interest rates will decrease the mines attractiveness to
potential buyers. Part D If the goldmine was located in an unstable third world country I certainly would accept a lower price.
There is less risk where there is political stability, but in an unstable developing nation nationalization of production businesses can be a danger. There would be even greater danger
of seizure of a gold mine. Part II General Motors Recently General Motors lost more than in any other year since 1992, and
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