Ralston Consulting, Inc., has a $40,000 overdue debt with supplier No. 1. The company is low on cash, with only $11,200 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 $11,200 now and $38,000 when some large projects are finished, two years from today.Option 2: Pay $56,000 three years from today, when even larger projects are finished. Assuming that the only factor in the decision is the cost of money (10%).(Click here to see present value and future value tables)A. Calculate the present value of each option. Round your present value factor to three decimal places and final answer to the nearest dollar.Present value of Option 1$Present value of Option 2B. Which option should Ralston choose?Option 1✔

Using the time value of money, a foundational concept in finance, one may quantify the present value…

Answered: Ralston Consulting, Inc., has a $40,000…

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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A firm has arranged for a lockbox system to reduce collection time of accounts receivable. Currently the firm has an average collection period of 43 days, an average age of inventory of 50 days, and an average payment period of 10 days. The lockbox system will reduce the average collection period by three days by reducing processing, mail, and clearing float. The firm has total annual outlays of $15,000,000 and currently pays 9 percent for its negotiated financing. A. Calculate the cash conversion cycle before the lockbox system B. Calculate the cash conversion cycle after the lockbox system C.
Blackstone Company purchased a new software system costing $35,000. To finance the purchase, Blackstone signed a contract agreeing to pay the cost over the next 8 years, with a payment due every six months; the first payment will be made six months from the date of purchase. Blackstone's usual interest rate is 10%. What is the amount of the payment required (rounded to the nearest dollar)? 's usual 096, What is the amount of the Select one: O a. 16,030 O b. 6,560 O c. 3,229 d. 2,575 e. None of the above
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Vaughn Excavating Inc. is purchasing a bulldozer. The equipment has a price of $97,600. The manufacturer has offered a payment plan that would allow Vaughn to make 10 equal annual payments of $15.883.95, with the first payment due one year after the purchase. x Your answer is incorrect. How much total interest will Vaughn pay on this payment plan? (Round factor values to 5 decimal places, eg 1.25124 and final answer to 0 decimal places, eg. 458.5811 Total interest 501877 Your answer is partially correct. Vaughncould borrow $97,600 from its bank to finance the purchase at an annual rate of 9% Click here to view factor tables Should Vaughn borrow from the bank or use the manufacturer's payment plan to pay for the equipment? (Round factor values to decimal places, s 1.25124 and final answer to O decimal places, eg 7%) 15.00 % Manufacturer's rate from the Da
The profit - maximizing manager of Big Farms wants to purchase a large piece of farm equipment. The manager has two financing options from two different banks. Big Bank will allow the manager to make five equal payments of $22,000 at the end of each of the next five years. Best Bank will allow the manager to make a payment of $10,000 at the end of the next four years and then make a balloon payment of $72,000 at the end of the fifth year. If the interest rate is 4 percent, which of the following statements is true? OA. The present value of the two payment plans is exactly the same, so the manager of Big Farms is indifferent between the two payment plans. OB. The manager of Big Farms should select Big Bank's offer as the present value of the payment plan is $97,939.60, which is lower than the payment plan offered by Best Bank. OC. The manager of Big Farms should select Big Bank's offer because the total repayment less than the total repayment at Best Bank. D. The manager of Big Farms…
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