IB417_16_problem_solving_class_questions

Question 1 a) A company is due to receive a payment of £500,000 from a customer in 6 months’ time. To smooth its cashflows, the company would prefer to receive the payment immediately, and has agreed to transfer its entitlement to this payment to a third party (a discount house) in return for an immediate payment calculated using a rate of commercial discount of 16% per annum.How much will the immediate payment made by the discount house be?b) An investor puts £5,000 in a savings account that pays 10% simple interest at the end of each year. Compare how much the investor would have after 6 years if the money was:i. Invested for 6 years ii. Invested for 3 years, then immediately reinvested for a further 3 years. c) £250 is invested in a savings account. The nominal rate of interest convertible monthly for the first 3 months is 18% and the nominal rate of interest convertible quarterly for the next 9 months is 20%. How much is in the account at the end of the year?d) Calculate the…

Exercise I. The bank has granted an overdraft facility to ABC company for the period. The overdraft facility amount is USD 3700000. The interest rate on the overdraft facility taken is 15% per annum, and the overdraft facility commission is set at 3% and is to be paid in advance. It is anticipated that within the first period (i.e. 140 days), the company will benefit from USD 985000 of the overdraft facility granted, and within the next 130 days from USD 785000 of the overdraft facility granted. Calculate the effective annual cost of using the overdraft facility by the company.

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urrent Attempt in Progress Assume that Henry Corporation has a contractual debt outstanding. Henry has available two means of settlement: It can either make immediate payment of $1,485,000, or it can make annual payments of $195,000 for 10 years, each payment due on the last day of the year. Click here to view factor tables Which method of payment do you recommend, assuming an expected effective interest rate of 9% during the future period? (Round factor values to 5 decimal places, e.g. 1.25124 and final answer to 0 decimal places, e.g. 458,581.) Present Value of annual payments Recommended payment method $

Question Content Area Ralston Consulting, Inc., has a $48,000 overdue debt with Supplier No. 1. The company is low on cash, with only $13,440 in the checking account and does not want to borrow any more cash. Supplier No. 1 agrees to settle the account in one of two ways: Option 1: Pay $13,440 now and $45,600 when some large projects are finished, two years from today. Option 2: Pay $67,200 three years from today, when even larger projects are finished. Assuming that the only factor in the decision is the cost of money (12%). (Click here to see present value and future value tables) A. Calculate the present value of each option. Round your present value factor to three decimal places and final answer to the nearest dollar. Present value of Option 1 $fill in the blank 1 Present value of Option 2 $fill in the blank 2 B. Which option should Ralston choose?

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Question content area top Part 1 ​(Present value of a complex​ stream)  Don Draper has signed a contract that will pay him $55,000 at the end of each year for the next 10 ​years, plus an additional $120,000 at the end of year 10. If 8 percent is the appropriate discount​ rate, what is the present value of this​ contract?       Question content area bottom Part 1 The present value of the contract is ​$enter your response here.   ​(Round to the nearest​ cent.)

Knowledge Check 01 Turing City, Inc., purchased equipment and agreed to pay the supplier $500 per month for 10 months and an additional $5,000 at the end of 10 months. The supplier is charging 12% interest per year, or 1% per month. What is the amount of the liability that should be recorded on the date the note is signed? Use Table E.1 and Table E.2. (Round your answer to 2 decimal places.) Present value

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Problem 6-4 (IAA) Gullible Company is a dealer in equipment. On December 31, 2020, the entity sold an equipment in exchange for a noninterest bearing note requiring five annual payments of P500,000. The first payment was made on December 31, 2021. The market interest for similar notes was 8%. The relevant present value factors are: PV of 1 at 8% for 5 periods PV of an ordinary annuity of 1 at 8% for 5 periods 0.68 3.99 Required: 1. Prepare journal entries for 2020 and 2021. 2. Determine the carrying amount of the note receivable on December 31, 2021. 8. Determine the interest income for 2022.

Value of a mixed stream at the end of years 1 and 2 Harte Systems, Inc., a maker of electronic survillance equipment, is considering selling the rights to market its home security system to a well-known hardware chain. The proposed deal calls for the hardware chain to pay Harte $34,000 and $29,000 and to make annual year-end payments of $14,000 in years 3 through 9. A final payment to Harte of $10,000 would be due at the end of year 10. a. Select the time line that represents the cash flows involved in the offer. b. If Harte applies a required rate of return of 9% to them, what is the present value of this series of payments? c. A second company has offered Harte an immediate one-time payment of $120,000 for the rights to market the home security system. Which offer should Harte accept? a. Which of the following time lines represents the cash flows involved in the offer? (Select the best answer below.) 3 + $10,000 $14,000 $29,000 2 O A. O B. O C. O D. 0 0 0 0 1 1 2 3 $34,000 $29,000 -…

Question 1   (Pricing a forward contract with dividends) The current price of silver is $206 per ounce. The storage cost is $1 ounce per year, payable quarterly in advance. Assuming a constant annual interest rate of 9% compounded quarterly, what is the theoretical forward price of silver for delivery in 9 months? Please submit your answer rounded to the nearest integer - for example, if your answer is 19.819.8, round it to either 2020.

Differential Analysis Involving Opportunity Costs On August 1, Rantoul Stores Inc. is considering leasing a building and purchasing the necessary equipment to operate a retail store. Alternatively, the company could use the funds to invest in $1,000,000 of 4% U.S. Treasury bonds that mature in 15 years. The bonds could be purchased at face value. The following data have been assembled: Cost of store equipment $1,000,000 Life of store equipment 15 years Estimated residual value of store equipment $50,000 Yearly costs to operate the store, excluding     depreciation of store equipment $200,000 Yearly expected revenues—years 1–6 $300,000 Yearly expected revenues—years 7–15 $400,000       Required:  Prepare a differential analysis as of August 1 presenting the proposed operation of the store for the 15 years (Alternative 1) as compared with investing in U.S. Treasury bonds (Alternative 2). If an amount is zero, enter "0". Differential…

Differential Analysis Involving Opportunity Costs On August 1, Rantoul Stores Inc. is considering leasing a building and purchasing the necessary equipment to operate a retail store. Alternatively, the company could use the funds to invest in $1,000,000 of 4% U.S. Treasury bonds that mature in 15 years. The bonds could be purchased at face value. The following data have been assembled: Cost of store equipment $1,000,000 Life of store equipment 15 years Estimated residual value of store equipment $50,000 Yearly costs to operate the store, excluding     depreciation of store equipment $200,000 Yearly expected revenues—years 1–6 $300,000 Yearly expected revenues—years 7–15 $400,000