Part (a): It is said that the Indian who sold Manhattan for $34 was a sharp salesman. If he had put his $34 away at 5% compounded semiannually, it would now be worth more than $4 billion, and he could buy most of the now-improved land back! Assume that this seller invested on January 1, 1701, the $34 he received. (Enter amounts in whole dollars, not in billions. Round final answers to nearest whole dollar amount.) Required: 1. Use Excel to determine the balance of the investment as of December 31, 2021, assuming a 5% interest rate compounded semiannually. (Hint: Use the FV function in Excel.) 2. Use Excel to determine the balance of the investment as of December 31, 2021, assuming an 6% annual interest rate, compounded semiannually. (Hint: Use the FV function in Excel.) 3. What would be the balances for requirements 1 and 2 if interest is compounded quarterly? 4. Assume that the account consisting of this investment had a balance of $4.5 billion is of December 31, 2021. How much would the total amount be on December 31, 2027, if the annual interest rate is 6%, compounded semiannually?

FINANCIAL ACCOUNTING
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ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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Part (a):
It is said that the Indian who sold Manhattan for $34 was a sharp salesman. If he had put his $34 away at 5% compounded
semiannually, it would now be worth more than $4 billion, and he could buy most of the now-improved land back! Assume that this
seller invested on January 1, 1701, the $34 he received. (Enter amounts in whole dollars, not in billions. Round final answers to
nearest whole dollar amount.)
Required:
1. Use Excel to determine the balance of the investment as of December 31, 2021, assuming a 5% interest rate compounded
semiannually. (Hint: Use the FV function in Excel.)
2. Use Excel to determine the balance of the investment as of December 31, 2021, assuming an 6% annual interest rate, compounded
semiannually. (Hint: Use the FV function in Excel.)
3. What would be the balances for requirements 1 and 2 if interest is compounded quarterly?
4. Assume that the account consisting of this investment had a balance of $4.5 billion is of December 31, 2021. How much would the
total amount be on December 31, 2027, if the annual interest rate is 6%, compounded semiannually?
Part (b):
In 2000, a star major-league baseball player signed a 10-year, $262 million contract with the Texas Rangers. Assume that equal
payments would have been made each year to this individual and that the owners' cost of capital (discount rate) was 10% at the time
the contract was signed. What is the present value cost of the contract to the owners as of January 1, 2000, the date the contract was
signed, in each of the following independent situations? (Use Table 1 and Table 2.) (Round your answers to the nearest whole dollar
amount and not in millions.)
Required:
1. The player received the first payment on December 31, 2000.
2. The player received the first payment on January 1, 2000, the date the contract was signed.
3. Assuming the owner is in the 40% income tax bracket, calculate your answer for requirement 1.
Complete this question by entering your answers in the tabs below.
Req A1
Req A2
Req A3
Req A4
Req B1
Req B2
Req B3
Use Excel to determine the balance of the investment as of December 31. 2021. assuming a 5% interest rate compounded
800
%
205
74
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92
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Transcribed Image Text:b.mheducation.com/ext/map/index.html?_con=con&external_browser=0&launchUrl=https%253A%252F%252Fbb.tulsacc.edu%2... 12 Saved 9 Help ces 12-4, 12-51 Part (a): It is said that the Indian who sold Manhattan for $34 was a sharp salesman. If he had put his $34 away at 5% compounded semiannually, it would now be worth more than $4 billion, and he could buy most of the now-improved land back! Assume that this seller invested on January 1, 1701, the $34 he received. (Enter amounts in whole dollars, not in billions. Round final answers to nearest whole dollar amount.) Required: 1. Use Excel to determine the balance of the investment as of December 31, 2021, assuming a 5% interest rate compounded semiannually. (Hint: Use the FV function in Excel.) 2. Use Excel to determine the balance of the investment as of December 31, 2021, assuming an 6% annual interest rate, compounded semiannually. (Hint: Use the FV function in Excel.) 3. What would be the balances for requirements 1 and 2 if interest is compounded quarterly? 4. Assume that the account consisting of this investment had a balance of $4.5 billion is of December 31, 2021. How much would the total amount be on December 31, 2027, if the annual interest rate is 6%, compounded semiannually? Part (b): In 2000, a star major-league baseball player signed a 10-year, $262 million contract with the Texas Rangers. Assume that equal payments would have been made each year to this individual and that the owners' cost of capital (discount rate) was 10% at the time the contract was signed. What is the present value cost of the contract to the owners as of January 1, 2000, the date the contract was signed, in each of the following independent situations? (Use Table 1 and Table 2.) (Round your answers to the nearest whole dollar amount and not in millions.) Required: 1. The player received the first payment on December 31, 2000. 2. The player received the first payment on January 1, 2000, the date the contract was signed. 3. Assuming the owner is in the 40% income tax bracket, calculate your answer for requirement 1. Complete this question by entering your answers in the tabs below. Req A1 Req A2 Req A3 Req A4 Req B1 Req B2 Req B3 Use Excel to determine the balance of the investment as of December 31. 2021. assuming a 5% interest rate compounded 800 % 205 74 #3 92 2 W E R S D F LL Prev 2 of 4 MacBook Pro 66 Next > & * 7 8 T Y U G H H 6 O O P J K L
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