Assume your company just sold a mainframe computer. The computer originally cost $300,000 and had accumulated depreciation of $100,000 on the date of the sale. Instead of the buyer paying cash, she gave you a $400,000 noninterest-bearing note due and payable in 3 years. There is no established exchange price for the computer, and the note has no ready market. The prevailing rate of interest for a note of this type is 8%. What should your company record as a gain from the sale of this computer?
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- Determining Bond Prices, Interest Rates, and Financial Statement Effects Assume Deere & Company's 2012 10-K reports the following footnote relating to long-term debt. Deere's borrowings include $300 million, 7.125% notes, due in 2031 (bolded below). Long-term borrowings at October 31 consisted of the following in millions of dollars: Notes and Debentures 7.85% debentures due 2015 6.95% notes due 2019: ($700 principal) Swapped to variable interest rates of 6.1%-2012, 6.4%6-2011 8.95% debentures due 2019 8-1/2% debentures due 2022 6.55% debentures due 2028 8.10% debentures due 2030 7.125% notes due 2031 Other notes Total 2012 2011 $306 $306 743 734 56 56 105 105 200 200 250 300 Type Issuer Price Corp Deere & CO 133.63 250 300 13 18 $ 1,973 $ 1,969 A recent price quote (from Yahoo! Finance Bond Center) on Deere's 7.125% notes follows. Coupon YTM Current Fitch (%) Maturity (%) Yield (%) Rating Callable 7.125 3-Mar-2031 4.678 5.332 A No This price quote indicates that Deere's 7.125% notes…Curly's Life Insurance Co. is trying to sell you an investment policy that will pay you and your heirs $25,000 per year forever. A representative for Curly's tells you the policy costs $450,000 Required: At what interest rate would this be a fair deal? (Enter rounded answer as directed, but do not use rounded numbers in intermediate calculations. Enter your answer as a percent rounded to 2 decimal places (e.g., 32.16).) Interest rate |%Suppose a bank issued a 30-year loan at a fixed rate of 2.5% with monthly payments 10 years ago. However, the bank now needs to sell this loan to raise money, but interest rates have risen to 7%. While on paper, the borrower still owes $____________________, the bank can only expect to sell this loan for $____________________ assuming they have plenty of time to find an appropriate buyer. Both the bank and the buyer of the loan expect that the homeowner will hold the loan to maturity
- 4. On 1/1/21 we sell equipment and accept a 3-year note receivable for $36,500. The market value is $36,500. Payments of $13,655 include both principal and interest and are to be made annually starting on 1/1/22. The present value of the payments is $36,500. The bank would require the purchaser to pay interest of 6% in order to borrow from them. The equipment cost us $90,000 and had a book value of $40,000. Note: Be sure to show the date of each journal entry. The 'right' journal entry on the 'wrong' date is wrong. a. Prepare an amortization table b. Prepare the journal entry for 1/1/21 c. Prepare the journal entry for 12/31/21 d. Prepare the journal entry for 1/1/22 Amortization table: Journal entries: Debits Credits 1/1/21 12/31/21 1/1/22You can buy property today for $3.1 million and sell it in 6 years for $4.1 million. (You earn no rental income on the property.) a. If the interest rate is 7%, what is the present value of the sales price? (Do not round intermediate calculations. Enter your answer in millions rounded to 3 decimal places.) b. Is the property investment attractive to you? yes or no c-1. What is the present value of the future cash flows, if you also could earn $210,000 per year rent on the property? The rent is paid at the end of each year. (Do not round intermediate calculations. Enter your answer in millions rounded to 3 decimal places.) c-2. Is the property investment attractive to you now? yes or noSuppose a life insurance company sells a $250,000 one-year term life insurance policy to a 24-year-old female for $360. The probability that the female survives the year is 0.999477. Compute and interpret the expected value of this policy to the insurance company. The expected value is $ (Round to two decimal places as needed.) Which of the following interpretation of the expected value is correct? O A. The insurance company expects to make an average profit of $32.71 on every 24-year-old female it insures for 1 month. O B. The insurance company expects to make an average profit of $359.81 on every 24-year-old female it insures for 1 year. O C. The insurance company expects to make an average profit of $20.84 on every 24-year-old female it insures for 1 month. O D. The insurance company expects to make an average profit of $229.25 on every 24-year-old female it insures for 1 year.
- 1) A factoring company discounts a client a document with a maturity value of 40,000 at a discount rate of 16% simple per year with a maturity of 90 days. On the same day, the factoring company discounts the document at a financial institution that offers a discount rate of 15% simple annual rate. What was the profit that the factoring company obtained? options: 100 72 181 142A friend of yours hasn't taken this cCourse and therefore does not appreciate the time-value of money He offers to pay you back for that time he borrowed money and gives you two options: 1. Two equal payments of $1030, today and in 2 years, or 2. One single payment of $2060 (twice the amount) in 1 year. Now, because you appreciate the time-value of money, you realize that, while the two options appear to have equal value, the two-payment option has a greater value. Assuming money can earn 11% compounded quarterly, how much of a difference is there between the values of the two options? Use today as your focal date and ensure your answer is positive. Answer: $277The Borstal Company has to choose between two machines that do the same job but have different lives. The two machines have the following costs: Year Machine A Machine B $42,500 10,500 10,500 10,500 + replace $52,500 9,000 9,000 9,000 9,000 + replace 4 These costs are expressed in real terms. Suppose that technological change is expected to reduce costs by 10% per year. There will be new machines in year 1 that cost 10% less to buy and operate than A and B. In year 2, there will be a second crop of new machines incorporating a further 10% reduction, and so on. Suppose you are Borstal's financial manager. If you had to buy one or the other machine and rent it to the production manager for that machine's economic life, what annual rental payment would you have to charge at the end of the first year and how would this alter in subsequent years given the expected technological changes? Assume a 9% real discount rate and ignore E taxes. (Do not round intermediate calculations. Enter your…
- Suppose someone offered to sell you a note (an investment) that calls for $1,000 payment two years from today. The person offers to sell the note for $880. You have $880 in a bank time deposit (savings instrument) that pays a 6.766492 percent simple rate with daily compounding, which is a 7 percent effective annual interest rate; and you plan to leave this money in the bank unless you buy the note. The note is not risky — that is, you are sure it will be paid on schedule. a. Should you buy the note? Check the decision in three ways: i. by comparing your future value if you buy the note versus leaving your money by comparing the pv of the note with your current bank investments and by comparaing the r earon the note with your current bank4. The Bull bank has a $100,000 30 year loan that was made 6 months ago to a homeowner who is making monthly payments to yield an interest rate of 7% compounded monthly. It would like to sell the loan to increase its overall liquidity. a. What is the current balance on the loan? b. What would be the value of this loan to a potential buyer if it was guaranteed to remain outstanding for the entire holding period, assuming the buyer’s RRR was 6% compounded monthly?CNBC reported that one in five consumers who purchase bitcoin do so using their credit card. Melissa Gamez purchased a used RV with 20,000 miles for $47,900. Originally the RV sold for $75,000 with a residual value of $21,000. After subtracting the residual value, depreciation allowance per mile was $0.96. How much was Melissa’s purchase price was over or below the below the book value? Note: Input the amount as a positive value. Purchase Price was: The book value by:
