FIN 251 Ch. 6 HW
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Chapter 6
Points
Name
1
3
2
3
3
4
4
4
5
6
6
2
7
2
8
6
9
4
10
6
40
link
link
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Calculating Present Values
Present Value
Interest Rate
1 10.00%
680
a.)
$2,779.30
618
18.00%
680
b.) $2,323.27
576
24.00%
680
c.)
$2,054.62
548
Table of Contents
Royal Inc. has identified an investment project with estimated cash flows:
Year 1 - $680
Year 2 - $810
Year 3 - $940
Year 4- $1,150
Estimate the PV with discount rates of:
a.) 10%
b.) 18%
c.) 24%
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Years
2 3 4 810
940
1,150
669
706
785
1 point
810
940
1,150
582
572
593
1 point
810
940
1,150
527
493
486
1 point
Calculating Future Values
Year
Future Value
Interest Rate
1 2 8.00%
1,225
1,345
1,543
1,569
11.00%
1,225
1,345
1,675
1,657
24.00%
1,225
1,345
2,336
2,068
Table of Contents
ABC Inc. has identified an investment project with the following estimated cash flows:
Year 1 - $1225
Year 2 - $1345
Year 3 - $1460
Year 4- $1590
Estimate the Future Value with discount rates of:
a.) 8%
b.) 11%
c.) 24%
Important
*Hint- Remember these are FV not PV.
*Count how many periods each pmt will earn interest It helps to draw a timeline and count how many periods of compounding there will be for each cash flow
rs
3 4 1,460
1,590
1,577
1,590
$6,279
1 Point
1,460
1,590
1,621
1,590
$6,543
1 Point
1,460
1,590
1,810
1,590
$7,804
1 Point
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Calculating Annuity Cashflows
N
20
I/Y
6.30%
PV
$40,000
PMT
$3,572.79 Pmt Function
4 points
FV 0
Table of Contents
If you put up $40,000 today in exchange for a 6.3%, 20 year annuity, what will the annual cash flow be?
Calculating Annuity Cashflows
a.
N
20
b.
N
40
Rate
9.70%
Rate
9.70%
PV
0
PV
0
PMT
$4,000
PMT
$4,000
FV Function
$221,439
FV $1,631,984
2 Points
2 Points
Table of Contents
If you deposit $4,000 at the end of each of the next 20 years into an account paying 9.7% interest, how much money will you have in the account in:
a.) 20 years
b.) 40 years
Loan Amoritzation
5
Amount
50,000.00
Beginning
Total Interest
Year
Balance
Payment
Paid
1
$50,000
$12,358
$3,750
2
$41,392
$12,358
$3,104
3
$32,138
$12,358
$2,410
4
$22,190
$12,358
$1,664
5
$11,496
$12,358
$862
6 Points Total
Table of Contents
Loan Term (Years)
Royal Bank offers you a 5 year loan for $50,000 at an annual interest rate of 7.5%. a.) What will your annual loan payment be?
b.) Fill in the Amortization table for the 5 years
Step 1.) *Use PMT Function for Total Payment
Step 2.) *Fill in the amortization table
*Only use cell references
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Rate
7.50%
Principal
Ending Paid
Balance
$8,608
$41,392
$9,254
$32,138
$9,948
$22,190
$10,694
$11,496
$11,496
$0
N
7
Rate
7.8%
PV
$298,804 PMT
$57,000
FV 0
2 Points
Table of Contents
Your company will generate an estimated $57,000 in annual revenue each year for the next 7 years from an investment in a new warehouse. If the appropriate interest rate is 7.8%, what is the present value of all estimated future cash flows?
PMT
$40,000
Rate
5.10%
PV
$784,314
2 Points
Table of Contents
The ABC Life insurance company is trying to sell you an investment policy that will pay you and your heirs $40,000 per year forever. If the required return on this investment is 5.1%, how much will you pay for this policy?
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Number of Times Compounded
7.0%
Quarterly
4
7.19%
17.0%
Monthly
12
18.39%
13.0%
Daily
365
13.88%
6 points
Table of Contents
Stated Rate
Effective Annual Rate
Formula
Calculate the Effective Annual Rates of the four stated rates. Use the EAR formula and EFFECT function to calculate. (They will be the same answer for both)
7.19%
18.39%
13.88%
Effective Annual Rate
Function
Number of Times Compounded
12.0%
Semi-Annual
2
12.40%
11.1%
Monthly
12
11.70%
9.1%
Weekly
52
9.50%
7.6%
Daily
365
7.90%
4 Points
Table of Contents
Stated Rate
Effective Annual Rate
Calculate the Stated Annual Rates (Advertised) of the four Effective rates. (nominal Function)
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Calculating EAR
First National Bank
Quoted Rate
12.40%
Compounded Monthly
12
Effect Annual Rate (Formula)
13.13%
Effect Annual Rate (Function)
13.13%
First United Bank
6 Points
Table of Contents
As a potential
borrower
, which bank would y
First National Bank charges 12.4% compounded monthly on its business loans. First United Bank charges 12.7% compounded semi-annually. As a potential borrower, which bank would you go for the new loan?
First United Bank
Quoted Rate
12.70%
Compounded semiannually (2)
2
Effect Annual Rate (Formula)
13.10%
Effect Annual Rate (Function)
13.10%
you go for a new loan?
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5
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June 30, 2024
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Notes payable
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4. PE.14.04B
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Ware Co. produces and sells motorcycle parts. On the first day of its fiscal year, Ware Co. issued $50,000,000 of four-year, 13% bonds at a market
5. PE.14.05B
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6. PE.14.06B
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7. PE.14.07B
$
8. РЕ.14.08B
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Question 13 options:
12345
mortgage
12345
trade receivables
12345
equipment
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working capital
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inventory
1.
factoring
2.
warehouse financing
3.
line of credit
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Problem PA 8
3
GENERAL JOURNAL
PAGE
X
4
Since the text does not specify, choose your own dates for these transactions
5
POST
DATE
DESCRIPTION
REF,
DEBIT
CREDIT
6
7
1 || 20xx
8
2
12
9
3
3
10
4
11
5
15
12
6
16
13
7
17
14
8
8
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19
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28
28
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46
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39
47
40
40
48
41
41
49
42
42
50
43
43
51 44
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None
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A) 7,800
B) 4,800
C) 6,800
D) 5,800
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march eacg Letter to the correct number answer to the left:
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4. Simple interest
5. Annuity
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7. Annuity due
8. Future value of a single amount
9. Ordinary annuity
10. Effective rate or yield
11. Nonmonetary asset
12. Time value of money
13. Monetary liability
1. ______
2. ______
3. ______
4. ______
5. ______
6. ______
7. ______
8. ______
9. ______
10. ______
11. ______
12. ______
13. ______
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17 Accounts Receivable
18 Allowance for doudtful debts
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8
9 Accounts Receivable written off
0 Credit issued to customers for sales returns
1 Recovery of Accounts Receivable, written off
12 as uncollectible in the prior year (not included in the cash collected above)
13
14
15 The following were taken from the Balance Sheet dated Dec 31, 20X4
16
Alignment
Search (Alt+C
H
Sheet1 ex. for income stmt. approach Practice Question Sheet4
22
1
V
620,000
5450
14500
3400
General
96400
9700
J
V
Number
20 Jeremy Company estimated that bad debts (uncollectible) to be equal to 0.5% of credit sales, net of sales returns
21
22 Calculate the Accounts Receivable and Allowance for doubtful debts accounts balances as at Dec 31, 20X5…
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MP
MT
HS
DS
CD
Simp
Conj
Add
DM
Com
Assoc
Dist
DN
Trans
Impl
Equiv
Exp
Taut
ACP
CP
AIP
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PREMISE
1.
H (~T ɔ R)
PREMISE
Hv (E ɔ F)
PREMISE
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CONCLUSION
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FREMISE
RULE
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4 Simp
PREMISE
6. An investor lends $5000 and receives a
promissory note promising repayment of the
loan in 90 days with 8.5% simple interest. This
note is immediately sold to a bank that charges
8% simple interest. How much does the bank pay
for the note? What is the investor's profit? What
is the bank's profit on this investment when the
note matures?
2.
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Ch 07: Assignment - Using Consumer Loans
12. Buy on time or pay cash?
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Owher of thế business
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(Marks: 25)
Willow Traders is a nursery in Diepkloof. It is owned by Violet who is studying part-time at
Rosebank College. Willow Traders uses the perpetual inventory system to record inventory
transactions. Mark-up is 20% on cost on all good sold.
VAT can be ignored on all transactions.
The following transactions took place in the month of August 2020:
NO
DATE
TRANSACTION
2.1
1
Owner contributed a delivery vehicle valued at R200 000
2.2
4.
Purchased goods for cash R10 000 and received a trade discount of
5%
2.3
6.
Sold 10 Pecan Trees at R50 each for cash to Lilly Rogers
2.4
15
Paid R300 cash for an advert in the local newspaper
20
Violet took a rose tree as a birthday present for her sister. Rose tree
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ork Problems Chapter 2
of 3
eBook
Print
References
Mc
Graw
Hill
9
O8 https://ezto.mheducation.com/ext/map/index.html?_con=con&external_browser=0&launchUrl=
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Required information
[The following information applies to the questions displayed below.]
The accounting records of Nettle Distribution show the following assets and liabilities as of December 31 for Year 1 and
Year 2.
December 31
Cash
Accounts receivable
Office supplies
Office equipment
Trucks
Building
Land
Accounts payable
Note payable
Equity, December 31, Year 1
Add: Owner's investment
Less: Dividends
Equity, December 31, Year 2
Year 1
$ 52,692
28,602
F2
4,512
138,498
54, 196
0
0
75,195
0
2. Compute net income for Year 2 by comparing total equity amounts for these two years and using the following information: During
Year 2, the owner invested $36,000 additional cash in the business in exchange for common stock, and the company paid a $37,200
cash dividend.
C
#
$
65
Year 2
F3
$ 9,883
22,424
3,305
147,527
63, 196
180,667
45,083…
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Exhibit 7 Present Value of an Annuity of $1 at Compound Interest
bas jeg 023-262 pixels
Periods 4%
1
0.96154
2
1.88609
3
4
2.77509
3.62990 3.58753 3.54595
415% 5%
0.95694 0.95238
1.87267 1.85941
274896 2.72325
5
4.45182
4.38998 4.32948
6
5.24214 5.15787
5.07569
4.99553
7
6.00205 5.89270
5.78637
5.68297
8
6.73274 6.59589 6.46321
9
7.43533 7.26879
10
8.11090 7.91272
7.10782
7.72173
54%
6%
615%
7%
10%
11% 12% 13%
0.94787 0.94340 0.93897 0.93458 0.90909 0.90090 0.89286 0.88496
1.84632 1.83339 1.82063 1.80802 1.73554 1.71252 1.69005 1.66810
2.69793 2.67301 2.64848 2.62432 2.48685 2.44371 2.40183 2.36115
3.50515 3.46511 342580 3.38721 3.16987 3.10245 3.03735 2.97447
4.27028 4.21236 4.15568 4.10020 3.79079 3.69590 3.60478 3.51723
4.91732 4.84101 4.76654 4.35526 4.23054 4.11141 3.99755
5.58238 5.48452 5.38929 4.86842 471220 4.56376 4.42261
6.33457 6.20979 6.08875 5.97130 5.33493 5.14612 4.96764 4.79677
6.95220 6.80169 6.65610 6.51523 5.75902 5.53705 532825 5.13166
7.53763 7.36009 7,18883…
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