Assume you owns stock in a local publicly traded company. Assume also that the stock price has declined since it was purchased two years ago, and you like the long-term prospects for the company. Assume you sell the stock to your sister because you need cash for a down payment on a new home: Would the loss be deductible for you? Assuming you are correct and the stock price increases in the future, how would your sister's gai

Assume you owns stock in a local publicly traded company. Assume also that the stock price has declined since it was purchased two years ago, and you like the long-term prospects for the company. Assume you sell the stock to your sister because you need cash for a down payment on a new home: Would the loss be deductible for you? Assuming you are correct and the stock price increases in the future, how would your sister's gai

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Kash, Doll, and Tracy T are opening a new restaurant. They take out a 4.1%, 18-year, $250,000 mortgage on the building, but they do not have a lot of money because they are spending what they must to get the business started. In the future they intend to earn much more money from the success of the restaurant. Can they get a loan that will fit well with their current and future incomes? How much will they pay in interest for the loan? What are the monthly payments?
(Related to Checkpoint 5.5) (Solving for n) Jack asked Jill to marry him, and she has accepted under one condition: Jack must buy her a new $300,000 Rolls-Royce Phantom. Jack currently has $29,930 that he may invest. He has found a mutual fund with an expected annual return of 6.5 percent in which he will place the money. How long will it take Jack to win Jill's hand in marriage? Ignore taxes and inflation. The number of years it will take for Jack to win Jill's hand in marriage is years. (Round to one decimal place.)
(Related to Checkpoint 5.5) (Solving for n) Jack asked Jill to marry him, and she has accepted under one condition: Jack must buy her a new $340,000 Rolls-Royce Phantom. Jack currently has $62,720 that he may invest. He has found a mutual fund with an expected annual return of 4.5 percent in which he will place the money. How long will it take Jack to win Jill's and in marriage? Ignore taxes and inflation. Question content area bottom Part 1 The number of years it will take for Jack to win Jill's hand in marriage (Round to one decimal place.)
Which is an example of a long-term capital accumulation goal: O Pay off credit cars at the end of each month and do not finance any purchases of appliances or similar products. O O Own substantial shares of mutual funds that pay dividends equivalent to 10% of family income by age 45. Purchase a new car in 2 years Buy sufficient disability insurance
Case, Part 2: Suppose you decide that you will not submit an application for an ARM due to Velma’s intention to retire in three years, about the time the monthly payments on the loan could jump beyond her ability to pay on a fixed income. You don’t want to seem as though you are pushing through an inappropriate loan. Velma is very unhappy and accuses you of refusing to help her because she’s a woman and a minority. It seems as though your choice is between risking accusations of discrimination or accusations of predatory lending. Now, what do you do?
Assume that an investor short-sells 600 shares of stock at a price of $45 a share, making a 50 percent margin deposit. A year later, she repurchases the borrowed shares at $30 a share. How much of her money did the short-seller have to put up to make this transaction?$ How much money did the investor make, or lose, on this transaction? Ignore margin interest.$ What rate of return did she make on her invested capital (see part a)? Ignore margin interest. Round the answer to two decimal places. %
Arianna just made another fantastic investment: She purchased 400 shares in Great Gains Corporation for $31.5831.58 per share. Yesterday the stock closed at $86.2986.29 per share. In order to lock in her gains, she has decided to employ a stop-loss order. Assuming she set the order at $85.8185.81, what is likely to happen? Why might this not be a wise decision? At what price would you recommend setting the stop-loss order? Why? Question content area bottom Part 1 In order to lock in her gains, she has decided to employ a stop-loss order. Assuming she set the order at $85.8185.81: (Select the best answer below.) A. It is unlikely that the position will be sold as the stock fluctuates around its closing price. B. There is not enough information to answer this. C. It is likely that the position will be sold as the stock fluctuates around its closing price. Your answer is correct. Part 2 At what price would you recommend setting the…
Nahshid and Senim own competing businesses and have agreed to collude to keep prices high. They both plan on being in business indefinitely (so this is an infinitely repeated game.) IF they collude, Nahshid gets a payoff of $120 now and $120 in every year going forward. But if Nahshid "cheats" he gets a one-time payoff of $130 now. Senim responds with a trigger strategy which means that Nahshid only gets $118 for every year after this. What does the interest rate have to be in order for Nahshid to continue colluding and not cheat? Select one: O a. Interest rate must be greater than or equal to 0.1, or 10%, to sustain collusion. O b. Interest rate must be less than or equal to 0.1, or 10%, to sustain collusion. O c. Interest rate must be greater than or equal to 0.2, or 20%, to sustain collusion. O d. Interest rate must be less than or equal to 0.2, or 20%, to sustain collusion.
(Related to Checkpoint 5.5) (Solving for n) Jack asked Jill to marry him, and she has accepted under one condition: Jack must buy her a new $330,000 Rolls-Royce Phantom. Jack currently has $19,770 that he may invest. He has found a mutual fund with an expected annual return of 6.5 percent in which he will place the money. How long will it take Jack to win Jill's hand in marriage? Ignore taxes and inflation. The number of years it will take for Jack to win Jill's hand in marriage is C years. (Round to one decimal place.)
Use the following information. When "trading up," it is preferable to sell your old house before buying your new house because that allows you to use the proceeds from selling your old house to buy your new house. When circumstances do not allow this, the homeowner can take out a bridge loan.Tina and Mike have sold their house, but they will not get the proceeds from the sale for an estimated 3 months. The owner of the house they want to buy will not hold the house that long. Tina and Mike have two choices: let their dream house go or take out a bridge loan. The bridge loan would be for $88,000, at 8.5% simple interest, due in 90 days. (Round your answers to the nearest cent.) (a) How big of a check would they have to write in 90 days?$ (b) How much interest would they pay for this loan?
STL inc will pay a $75 per dividend next year, followed by a last dividend of $30 per share in the year after. Sue has 50 shares in STL Inc. She wishes to limit her income from investments to no more than $35 in the first year. how can she achieve this goal through homemade dividends if the required return on STL Inc’s shares is 9%. What will Sue’s earnings be in the second year?
Suppose a wealthy individual approaches you and says, “Because of your outstanding ability to manage money, I am prepared to present you with a tax-free gift of $1,000. If you prefer, however, I will postpone the presentation for a year, at which time I will guarantee that you will receive a tax-free gift of $X.” (For purposes of this example, assume that the guarantee is risk-free.) In other words, you can choose to receive $1,000 today or receive $X 1 year from today. Which would you choose if X equals (1) $1,000, (2) $1,050, (3) $1,100, (4) $1,500, (5) $2,000, (6) $5,000, (7) $10,000, (8) $100,000? Suppose the student is guaranteed to receive $1,100 one year from today, and nothing thereafter, if $1,000 is invested today in a particular venture. What is the return on the student’s investment?