Question 1
6. Compute the internal rate of return for the cash flows of the following projects. Cash Flows Year Project A Project B 0 -3,500 -2,300 1 1,800 900 2 2,400 1,600 3 1,900 1,400 8. Calculating Profitability Index; Suppose the following two independent investment opportunities are available to Green plain, Inc. The appropriate discount rate is 10 percent. Year Project Alpha Project Beta 0 -1,500 -2,500 1 800 500 2 900 1,900 3 700 2,100 a. Compute the profitability index for each of the two projects. b. Which project(s) should Green plain accept based on the profitability index rule? 11. NPV versus IRR Consider the following cash flow on two mutually exclusive projects for the Bahamas Recreation Corporation (BRC). Both projects require an annual return of 14 percent. Year Deepwater Fishing New Submarine Ride 0 -750,000 -2,100,000 1 310,000 1,200,000 2 430,000 760,000 3 330,000 850,000 As a financial analyst for BRC, you are asked the following questions: a. If your decision rule is accept the project with the greater IRR, which project should you choose? b. Because you are fully aware of the IRR rule?s scale problem, you calculate the incremental IRR for the cash flows. Based on your computation, which project should you choose? c. To be prudent you compute the NPV for both projects. Which project should you choose? Is it consistent with the incremental IRR rule? 21. Payback and NPV An investment under consideration has a payback of sex years and a cost of $574,000. If the required return is 12 percent, what is the worst-case NPV? Explain. Assume cash flows are conventional 25. NPV and IRR Anderson International Limited is evaluating a project in Erewhon. The project will create the following cash flows: Year Cash flows 0 -750,000 1 205,000 2 265,000 3 346,000 4 220,000 All cash flows will occur in Erewhon and are expressed in dollars. In an attempt to improve its economy, the Erewhonian government has declared that all cash flows created by a foreign company are ?blocked? and must be reinvested with the government for one year. The reinvestment rate for these funds is 4 percent. If Anderson uses an 11 percent required return on this project, what are the NPV and IRR of the project? Is the IRR you calculated the MIRR of the project? Why or why not? Chapter 6 3. Calculating Project NPV Down Under Boomerang, Inc. is considering a new three year expansion project that requires an initial fixed asset investment of $2.4 million. The fixed asset will be depreciated straight-line to zero over its three-year tax life, after which it will be worthless. The project is estimated to generate $2,050,000 in annual sales, which costs of $950,000. The tax rate is 35 percent and the required return is 12 percent. What is the project?s NPV? 4. Calculating Project Cash Flow from Assets. In the previous problem, suppose the project requires an initial investment in net working capital of $285,000 and the fixed asset will have a market value of $225,000 at end of the project. What is the project?s year 0 net cash flow? Year 1? Year 2? Year 3? What is the new NPV? 14. Comparing Mutually Exclusive Projects Vandalay Industries is considering the purchase of a new machine for the production of latex. Machine A costs $2,400,000 and will last for sex years. Variable costs are 35 percent sales, and fixed costs are $180,000 per year. Machine B costs $5,400,000 and will last for nine years. The sales for each machine will be $10.5 million per year. The required return is 10 percent and the tax rate is 35 percent. Both machines will be depreciated on a straight-line basis. If the company plans to replace the machine when it wears out on perpetual basis, which machine should you choose? 21. Calculating NPV and IRR for a Replacement. A firm is considering an investment in a new machine with a price of $12 million to replace its existing machine. The current machine has a book value of $4 million and a market value of $3 million. The new machine is expected to have a four-year life, and the old machine has four years left in which it can be used. If the firm replaces the old machine with the new machine it expects to save $4.5 million in operating costs each year over the next four years. Both machines will have no salvage value in four years. If the firm purchases the new machine, it will also need an investment of $ 250,000 in net working capital. The required return on the investment is 10 percent, and the tax rate is 39 percent. What are the NPV and IRR of the decision to replace the old machine? 34. Benson Enterprises is evaluating alternative uses for a three-story manufacturing and warehousing building that it has purchased for $850,000. The company can continue to rent the building to the present occupants for $36,000 per year. The present occupants have indicated an interest in staying in the building for at least another 15 years. Alternatively, the company could modify the existing structure to use for its own manufacturing and warehousing needs. Benson?s production engineer feels the building could be adapted to handle one of two new product lines. The cost and revenue data for the two product alternatives are as follows. Product A Product B Initial cash outlay for building modifications 45,000 65,000 Initial cash outlay for equipment 165,000 205,000 Annual pretax cash revenues (generated for 15 yrs) 135,000 165,000 Annual pretax expenditures (generated for 15yrs) 60,000 75,000 The building will be used for only 15 years for either product A or product B. After 15 years the building will be too small for efficient production of either product line. At that time, Benson plans to rent the building to firms similar to the current occupants. To rent the building again, Benson will need to restore the building to its present layout. The estimated cash cost of restoring the building if product A has been undertaken is $29,000. If product B has been manufactured, the cash cost will be $35,000. These cash costs can be deducted for tax purposes in the year the expenditures occur. Benson will depreciate the original building shell (purchased for $850,000) over a 30-year life to zero, regardless of which alternative it chooses. The building modifications and equipment purchases for either product are estimated to have a 15-year life. They will be depreciated by the straight-line method. The firm?s tax rate is 34 percent, and its required rate of return on such investments is 12 percent. For simplicity, assume all cash flows occur at the end of the year. The initial outlays for modifications and equipment will occur today (year 0), and the restoration outlays will occur at the end of year 15. Benson has other profitable ongoing operations that are sufficient to cover any losses. Which use of the building would you recommend to management?,when will it be done approximately
Question 2
I need this asap by 2pm easter (U.S.A New york time). Last time you send it after 2pm. thnak you. . For an independent-measures design, the sample mean difference is always located exactly in the center of the confidence interval estimate for the population mean difference. (Points: 1) True False 2. In general, as sample size increases, the width of a confidence interval also increases. (Points: 1) True False 3. Estimation is commonly used after a hypothesis test when the decision is to fail to reject the null hypothesis. (Points: 1) True False 4. The wider the confidence interval, the less precise the estimate is. With this in mind, which combination of factors will produce the most precise estimate of the population mean? (Points: 1) a sample of n = 20 with 80% confidence a sample of n = 20 with 90% confidence a sample of n = 50 with 80% confidence a sample of n = 50 with 90% confidence 5. A researcher would like to determine how the average mathematical skill level for freshmen entering the college compares with the average from freshmen 10 years ago. A sample of n = 30 freshmen is obtained and each student is given a standardized mathematics skills test. The researcher plans to use the sample data to estimate the mean score for the current population of freshmen and then compare the result with the mean obtained 10 years ago. Which estimation equation should the researcher use? (Points: 1) the single-sample t equation the independent-measures t equation the repeated-measures t equation cannot determine without additional information 6. Post tests are not needed if the decision from an analysis of variance is to fail to reject the null hypothesis. (Points: 1) True False 7. An analysis of variance produces SSwithin = 40 and SStotal = 70. In this analysis, what is the value of SSbetween? (Points: 1) 30 40 110 Cannot be determined without additional information 8. A researcher reports an F-ratio with df = 2, 36 from an independent-measures research study. Based on the df values, how many treatments were compared in the study and what was the total number of subjects participating in the study? (Points: 1) 2 treatments and 37 subjects 2 treatments and 38 subjects 3 treatments and 38 subjects 3 treatments and 39 subjects 9. Which combination of factors will produce a large value for h2? (Points: 1) large mean differences and large sample variances large mean differences and small sample variances small mean differences and large sample variances small mean differences and small sample variances 10. The following table shows the results of an analysis of variance comparing two treatment conditions with a sample of n = 11 participants in each treatment. Note that several values are missing in the table. What is the missing value for the F-ratio? Source SS df MS Between xx xx 14 F = xx Within xx xx xx Total 154 xx (Points: 1) 2 7 14 28
Question 3
1. The amount recorded for merchandise inventory includes: Answer Any purchase discounts. Any returns and allowances. Any necessary freight costs. Any trade discounts. All of these. 2 points Question 2 Beginning inventory plus net purchases is: Answer Cost of goods sold. Merchandise available for sale. Ending inventory. Sales. Shown on the balance sheet. 2 points Question 3 A merchandising company: Answer Earns net income by buying and selling merchandise. Can buy products from manufacturers and sell to retailers. Can buy products from manufacturers and sell them to consumers. Can be a wholesaler or a retailer. All of these. 2 points Question 4 The operating cycle of a merchandising company: Answer Begins with the purchase of merchandise. Ends with the collection of cash from the sale of merchandise. Can vary in length among different merchandising companies. Sometimes involves accounts receivable. All of these. 2 points Question 5 On October 1, Robinson Company sold merchandise in the amount of $5,800 to Rosser, with credit terms of 2/10, n/30. The cost of the items sold is $4,000. Robinson uses the perpetual inventory system. The journal entry or entries that Robinson will make on October 1 is: Answer 2 points Question 6 A company uses the perpetual inventory system and recorded the following entry: This entry reflects a: Answer Purchase. Return. Sale. Payment of the account payable and recognition of a cash discount taken. Purchase and recognition of a cash discount taken. 2 points Question 7 An income statement that includes cost of goods sold as another expense and shows only one subtotal for total expenses is a: Answer Balanced income statement. Single-step income statement. Multiple-step income statement. Combined income statement. Simplified income statement. 2 points Question 8 Gross profit: Answer Is also called gross margin. Less other operating expenses equals income from operations. Equals net sales less cost of goods sold. Must cover all operating expenses to yield a return for the owner of the business. All of these. 2 points Question 9 Inventory shrinkage: Answer Refers to the loss of inventory. Is determined by comparing a physical count of inventory with recorded inventory amounts. Is recognized by debiting Cost of Goods Sold. Can be caused by theft or deterioration. All of these. 2 points Question 10 The acid-test ratio: Answer Is also called the quick ratio. Measures profitability. Measures inventory turnover. Is generally greater than the current ratio. All of these. 2 points Question 11 Expenses that support the overall operations of a business and include the expenses relating to accounting, human resource management, and financial management are called: Answer Cost of goods sold. Selling expenses. Purchasing expenses. General and administrative expenses. Nonoperating activities. 2 points Question 12 A trade discount is: Answer A term used by a purchaser to describe a cash discount given to customers for prompt payment. A reduction in price below the list price. A term used by a seller to describe a cash discount granted to customers for prompt payment. A reduction in price for prompt payment. Also called a rebate. 2 points Question 13 A company records the following journal entry: debit Cash $1,470, debit Sales Discounts $30, and credit Accounts Receivable $1,500. This means that a customer has taken a ___ cash discount for early payment. Answer 1% 2% 5% 10% 15% 2 points Question 14 The credit terms 2/10, n/30 are interpreted as: Answer 2% cash discount if the amount is paid within 10 days, or the balance due in 30 days. 10% cash discount if the amount is paid within 2 days, or the balance due in 30 days. 30% discount if paid within 2 days. 30% discount if paid within 10 days. 2% discount if paid within 30 days. 2 points Question 15 A debit to Sales Returns and Allowances and a credit to Accounts Receivable: Answer Reflects an increase in amount due from a customer. Recognizes that a customer returned merchandise and/or received an allowance. Requires a debit memorandum to recognize the customer's return. Is recorded when a customer takes a discount. All of these. 2 points Question 16 Multiple-step income statements: Answer Are required by the FASB. Contain more detail than a simple listing of revenues and expenses. Are required for the perpetual inventory system. List cost of goods sold as an operating expense. Can only be used in perpetual inventory systems. 2 points Question 17 J.C. Penny had net sales of $28,496 million, its cost of goods sold was $19,092 million, and its net income was $997 million. Its gross margin ratio equals: Answer 3.5%. 5.2%. 33%. 67%. 149.3%. 2 points Question 18 Sales returns: Answer Refer to merchandise that customers return to the seller after the sale. Refer to reductions in the selling price of merchandise sold to customers. Represent cash discounts. Represent trade discounts. Are not recorded under the perpetual inventory system until the end of each accounting period. 2 points Question 19 A company purchased $1,800 of merchandise on December 5. On December 7, it returned $200 worth of merchandise. On December 8, it paid the balance in full, taking a 2% discount. The amount of the cash paid on December 8 equals: Answer $200. $1,564. $1,568. $1,600. $1,800. 2 points Question 20 A company had net sales and cost of goods sold of $752,000 and $543,000, respectively. Its net income was $17,530. The company's gross margin ratio equals: Answer 18.9% 24.5% 27.8% 34.7% 35.2% 2 points Question 21 Merchandise inventory includes: Answer All goods owned by a company and held for sale. All goods in transit. All goods on consignment. Only damaged goods. All of these. 2 points Question 22 A company normally sells its product for $20 per unit. However, the selling price has fallen to $15 per unit. This company's current inventory consists of 200 units purchased at $16 per unit. Replacement cost has now fallen to $13 per unit. Calculate the value of this company's inventory at the lower of cost or market. Answer $2,550. $2,600. $2,700. $3,000. $3,200. 2 points Question 23 The consistency concept: Answer Requires a company to consistently apply the same accounting method of inventory valuation, an exception being when a change from one method to another will improve its financial reporting. Requires a company to use one method of inventory valuation exclusively. Requires that all companies in the same industry use the same accounting methods of inventory valuation. Is also called the full disclosure principle. Is also called the matching principle. 2 points Question 24 A company had inventory of 10 units at a cost of $20 each on November 1. On November 2, it purchased 10 units at $22 each. On November 6 it purchased 6 units at $25 each. On November 8, it sold 22 units for $54 each. Using the FIFO perpetual inventory method, what was the cost of the 22 units sold? Answer $470. $490. $450. $570. $520. 2 points Question 25 Which of the following inventory costing methods will always result in the same values for ending inventory and cost of goods sold regardless of whether a perpetual or periodic inventory system is used? Answer FIFO and LIFO LIFO and weighted-average cost Specific identification and FIFO FIFO and weighted-average cost LIFO and specific identification 2 points Question 26 Toys "R" Us had cost of goods sold of $9,421 million, ending inventory of $2,089 million, and average inventory of $1,965 million. Its inventory turnover equals: Answer 0.21. 4.51 4.79. 76.1 days. 80.9 days. 2 points Question 27 Regardless of the inventory costing system used, cost of goods available for sale must be allocated between Answer beginning inventory and net purchases during the period. ending inventory and beginning inventory. net purchases during the period and ending inventory. ending inventory and cost of goods sold. beginning inventory and cost of goods sold. 2 points Question 28 In applying the lower of cost or market method to inventory valuation, market is defined as: Answer Historical cost. Current replacement cost. Current sales price. FIFO. LIFO. 2 points Question 29 Given the following information, determine the cost of the inventory at June 30 using the LIFO perpetual inventory method. The cost of the ending inventory is Answer $200. $220. $380. $275. $300. 2 points Question 30 The inventory turnover ratio is calculated as: Answer Cost of goods sold divided by average merchandise inventory. Sales divided by cost of goods sold. Ending inventory divided by cost of goods sold. Cost of goods sold divided by ending inventory. Cost of goods sold divided by ending inventory times 365. 2 points Question 31 The full disclosure principle: Answer Requires that when a change in inventory valuation method is made, the notes to the statements report the type of change, its justification and its effect on net income. Requires that companies use the same accounting method for inventory valuation period after period. Is not subject to the materiality principle. Is only applied to retailers. Is also called the consistency principle. 2 points Question 32 Generally accepted accounting principles require that the inventory of a company be reported at: Answer Market value. Historical cost. Lower of cost or market. Replacement cost. Retail value. 2 points Question 33 An overstatement of ending inventory will cause Answer An overstatement of assets and equity on the balance sheet. An understatement of assets and equity on the balance sheet. An overstatement of assets and an understatement of equity on the balance sheet. An understatement of assets and an overstatement of equity on the balance sheet. No effect on the balance sheet. 2 points Question 34 Physical counts of inventory: Answer Are not necessary under the perpetual system. Are necessary to measure and adjust for inventory shrinkage. Must be taken at least once a month. Requires the use of hand-held portable computers. Are not necessary under the cost-to benefit constraint. 2 points Question 35 Goods on consignment: Answer Are goods shipped by the owner to the consignee who sells the goods for the owner. Are reported in the consignee's books as inventory. Are goods shipped to the consignor who sells the goods for the owner. Are not reported in the consignor's inventory since they do not have possession of the inventory. Are always paid for by the consignee when they take possession. 2 points Question 36 A 10-column spreadsheet used to draft a company's unadjusted trial balance, adjusting entries, adjusted trial balance, and financial statements, and which is an optional tool in the accounting process is a(n) : Answer Adjusted trial balance. Work sheet. Post-closing trial balance. Unadjusted trial balance. General ledger. 2 points Question 37 A company's ledger accounts and their end-of-period balances before closing entries are posted are shown below. What amount will be posted to Tricia DeBarre, Capital in the process of closing the Income Summary account? (Assume all accounts have normal balances.) Answer $16,780 debit. $ 7,180 credit. $16,780 credit. $18,280 credit. $23,780 credit. 2 points Question 38 When closing entries are made: Answer All ledger accounts are closed to start the new accounting period. All temporary accounts are closed but not the permanent accounts. All real accounts are closed but not the nominal accounts. All permanent accounts are closed but not the nominal accounts. All balance sheet accounts are closed. 2 points Question 39 Closing entries are required: Answer if management has decided to cease operating the business. only if the company adheres to the accrual method of accounting. if a company's bookkeeper forgets to prepare reversing entries. if the temporary accounts are to reflect correct amounts for each accounting period. in order to satisfy the Internal Revenue Service. 2 points Question 40 The current ratio: Answer Is calculated by dividing current assets by current liabilities. Helps to assess a company's ability to pay its debts in the near future. Can reveal problems in a company if it is less than 1. Can affect a creditor's decision about whether to lend money to a company. All of these. 2 points Question 41 Which of the following is the usual final step in the accounting cycle? Answer Journalizing transactions. Preparing an adjusted trial balance. Preparing a post-closing trial balance. Preparing the financial statements. Preparing a work sheet. 2 points Question 42 Statements that show the effects of proposed transactions as if the transactions had already occurred are called: Answer Pro forma statements. Professional statements. Simplified statements. Temporary statements. Interim statements. 2 points Question 43 The current ratio: Answer Is used to measure a company's profitability. Is used to measure the relation between assets and long-term debt. Measures the effect of operating income on profit. Is used to help evaluate a company's ability to pay its debts in the near future. Is calculated by dividing current assets by equity. 2 points Question 44 Two common subgroups for liabilities on a classified balance sheet are: Answer current liabilities and intangible liabilities. present liabilities and operating liabilities. general liabilities and specific liabilities. intangible liabilities and long-term liabilities. current liabilities and long-term liabilities. 2 points Question 45 A post-closing trial balance reports: Answer All ledger accounts with balances, none of which can be temporary accounts. All ledger accounts with balances, none of which can be permanent accounts. All ledger accounts with balances, which include some temporary and some permanent accounts. Only revenue and expense accounts. Only asset accounts. 2 points Question 46 The special account used only in the closing process to temporarily hold the amounts of revenues and expenses before the net difference is added to (or subtracted from) the owner's capital account is the: Answer Income Summary account. Closing account. Balance column account. Contra account. Nominal account. 2 points Question 47 The recurring steps performed each reporting period, starting with analyzing and recording transactions in the journal and continuing through the post-closing trial balance, is referred to as the: Answer Accounting period. Operating cycle. Accounting cycle. Closing cycle. Natural business year. 2 points Question 48 The following information is available for the Travis Travel Agency. After these closing entries what will be the balance in the Jay Travis, Capital account? Answer $ 65,000. $ 80,000. $130,000. $145,000. $280,000. 2 points Question 49 Closing the temporary accounts at the end of each accounting period: Answer Serves to transfer the effects of these accounts to the owner's capital account on the balance sheet. Prepares the withdrawals account for use in the next period. Gives the revenue and expense accounts zero balances. Causes owner's capital to reflect increases from revenues and decreases from expenses and withdrawals. All of these. 2 points Question 50 Another name for temporary accounts is: Answer Real accounts. Contra accounts. Accrued accounts. Balance column accounts. Nominal accounts.
Question 4
Margaret Walton spent 10 years working in the laboratory at City Hospital. During that time, she advanced to the position of director of the laboratory and completed an MBA degree. She felt that opportunities for further advancement at the hospital were limited and was looking for a new challenge. She took a course in entrepreneurship and was fascinated by the idea of starting her own business. Walton decided that she would open an independent laboratory to provide medical tests for independent medical practices. She believed that she could help physicians reduce both their capital requirements and administrative chores, as well as provide more accurate testing. Walton began assembling information. She discovered a piece of land available near a number of independent medical practices. The land could be purchased for $100,000, and a suitable building would cost approximately $400,000. The building would have a useful life of approximately 40 years. Laboratory equipment would cost $1 million. The equipment would have a life of 7 years for tax purposes, but would actually last 10 years. Although the business could continue indefinitely, Walton wanted to do the analysis based on the assumption of a life similar to that of the laboratory equipment:10 years. In addition to fixed asses, working capital such as cash, supplies, receivables, and payables would be needed. Walton wanted to maintain a minimum cash balance of $20,000. She estimated that $100,000 of supplies would be needed initially, and accounts payable at $40,000. She estimated that the cash, supplies, receivables, and payables categories would double at the end of the first year and would not increase thereafter. Walton predicted revenue of $600,000 during the first year and $1,200,000 each year thereafter. She estimated that labor expenses, including a salary for her equal to what she was now earning, of $300,000 in the firs year and $480,000 each year thereafter. She estimated a supplies expense of $120,000 in the first year and $190,000 each year thereafter. SHe estimated overhead expense, other than depreciation, of $100,000 a year. Looking ahead, Walton estimated that the equipment would have a negligible value in 10 years, while the building would have lost one-fourth of **** value and the land 1 would still be worth $100,000. She guessed that supplies inventory could be sold for half its cost, and other working capital items would be settled at their book values. Walton turned her attention to financing. She had limited capital of her own and would need to seek outside investors. She had heard enough horror stories about problems that occurred when companies could not make payments on debts, and she wanted to avoid those troubles. Thus, she wanted to try to arrange all equity financing, and use a bank line of credit only for temporary needs. Walton decided on a plan involving ten wealthy investors, preferably senior retired physicians who would then serve on the board of directors. She would fund the project by creating eleven shares ? one share free to herself as a founder?s share and one share to each of the investors. Each investor would then invest 10 percent of the capital requirements. Walton tentatively discussed the project with several senior retire physicians to see what would be required. They viewed this as an investment of moderate risk and indicated that they would want a 12 percent after tax return from an investment of this type. While several investors encourages her to continue, they were naturally unwilling to make a commitment without a proposal and a thorough financial analysis. Walton began to develop a profitability analysis and a proposal. She had to choose between the corporate tax form and an S form. She estimated that most investors would be in 28 percent tax brackets. All funds not needed internally would be paid out to the shareholders. She thought she could be ready to start by the first of the year, so assets would be considered placed in service in January. Case questions 1. Identify all cash flow on the assumption the business is taxed at a 28 percent tax rate. 2. Prepare a net present value analysis. 3. Does this investment provide a satisfactory rate of return to investors? 4. Is it fair and reasonable for Walton to get one-eleventh of the company without putting up equity capital of her own?,need excel file with pertinent data,what is the next step, I had inadvertently reposted the question.
Question 5
1. Sonny Bono made an investment on August 1, 2011 which earned $9,000 one year later. If the investment?s rate of return was 8%, how much did Sonny invest? $112,500 2. Patricia inherited $25,000 and invests this amount in an account that earns 4% interest per year compounded quarterly. If her investment grows to $31,742.50, how long was the money left in the account? 6 years 3. Randy just borrowed $21,999.85 to purchase a brand new car. The contract calls for monthly payments of $730.71 for three years. What is the annual interest rate for Randy?s contract? 12% 4. Eddy Money signed a three-year contract to host the Tonight Show. Although he will receive $130 million dollars over three years, the terms of the contract are that he is to receive $10 million at the end of each of the next three years plus an additional $100 million at the end of the third year. Assuming an annual interest rate of 10%, what is the actual value of Money?s contract in today?s dollars? (Hint: Think of the contact as two separate calculations) $99,999,000 5. Bobbi Simpson is evaluating different investment plans. She has a choice of investing $10,000 at either 5% simple interest or 5% compound interest that is compounded annually. What will be the difference between the total amounts of interest earned after two years? $25,00 6. Amit is currently 28 years old and plans on retiring at age 59. His plan is to begin making annual withdrawals from his retirement account of $85,000 each year beginning on his 59th birthday and continuing until age 82, the average life span for a man Amit?s age. Which table should Amit use to determine the total amount he needs to have saved up by the time he turns 59? PV of an Annuity of $1 7. The Ramos family would like to go on an European vacation when their two children graduate from college in 5 years. They can deposit $12,500 in an investment account today and they calculate that the vacation will cost a minimum of $20,300 in 5 years. What is the minimum annual interest rate they must earn to achieve their goal of $20,300 if the interest is compounded semi-annually? 10.0% 8. You landed a new Accounting job and decide that you can?t show up at your clients in an old clunker, so you start looking for a new car to purchase. El Monte Slim, the car salesmen, tells you that he can put you in a shiny new car for the low, low price of $618 per month for 3 years with a low interest rate of 12%. What is the price of the car? $18,606 9. What is the present value of $10,000 received twelve years from today, assuming an interest rate of 8% compounded semiannually? $ 3,901 10. Betty Maksitt is saving for a retirement log cabin in West Virginia. She is going to make 20 annual deposits of $5,000 each into an investment account beginning on July 1, 2012. Assuming an interest rate of 4%, on July 1, 2042, (the end of 20 years) Betty?s investment account will have the following balance: $148,891 For ACCT 2102 Homework Problems: Chapter 11 & 12 Present Value of $1: Interest rate 1% 4% 5% 8% 10% 12% # of periods 2 .9803 .9246 .9070 .8573 .8264 .7972 3 .9706 .8890 .8638 .7938 .7513 .7118 10 .9053 .6756 .6139 .4632 .3855 .3220 12 .8874 .6246 .5568 .3971 .3186 .2567 20 .8195 .4564 .3769 .2145 .1486 .1037 24 .7876 .3901 .3101 .1577 .1015 .0659 36 .6989 .2437 .1727 .0626 .0323 .0169 Future Value of $1: interest rate 1% 4% 5% 8% 10% 12% # of periods 2 1.0201 1.0816 1.1025 1.1664 1.2100 1.2544 3 1.0303 1.1249 1.1576 1.2597 1.3310 1.4049 10 1.1046 1.4802 1.6289 2.1589 2.5937 3.1058 12 1.1268 1.6010 1.7959 2.5182 3.1384 3.8960 20 1.2202 2.1911 2.6533 4.6610 6.7275 9.6463 24 1.2697 2.5633 3.2251 6.3412 9.8497 15.1786 36 1.4308 4.1039 5.7918 15.9682 30.9127 59.1356 Present Value of an annuity of $1: interest rate 1% 4% 5% 8% 10% 12% # of periods 2 1.9704 1.8861 1.8594 1.7833 1.7355 1.6901 3 2.9410 2.7751 2.7232 2.5771 2.4869 2.4018 10 9.4713 8.1109 7.7217 6.7101 6.1446 5.6502 12 11.2551 9.3851 8.8633 7.5361 6.8137 6.1944 20 18.0456 13.5903 12.4622 9.8181 8.5136 7.4694 24 21.2434 15.2470 13.7986 10.5288 8.9847 7.7843 36 30.1075 18.9083 16.5469 11.7172 9.6765 8.1924 Future Value of an annuity of $1: interest rate 1% 4% 5% 8% 10% 12% # of periods 2 2.0100 2.0400 2.0500 2.0800 2.100 2.1200 3 3.0301 3.1216 3.1525 3.2464 3.3100 3.3744 10 10.4622 12.0061 12.5779 14.4866 15.9374 17.5487 12 12.6825 15.0258 15.9171 18.9771 21.3843 24.1331 20 22.0190 29.7781 33.0660 45.7620 57.2750 72.0524 24 26.9735 39.0826 44.5020 66.7648 88.4973 118.1552 36 43.0769 77.5983 95.8363 187.1021 299.1268 484.4631
