Ray and Rachel are considering the purchase of two deluxe kitchen ovens. The first store offers thee two ovens for $3,500 withpayment due today. The second store offers the two ovens for $3,700 due in one year.Required:1-a. Assuming an annual discount rate of 9%, calculate the present value. (FV of $1, PV of $1, FVA of $1, and PVA of $1) (Useappropriate factor(s) from the tables provided. Round your answers to 2 decimal places.)Present ValueStore 1Store 21-b. From which store should Ray and Rachel buy their ovens?Store 1Store 2

Net present value: The difference between the inflow of cash and outflow of cash during the period…

Answered: Ray and Rachel are considering the…

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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Option Rex and Bonnie are wanting to buy a new entertainment couch with a sales price of $20,000 for their home theater room. They are presented with 2 different financing options from their bank for their purchase. Analyze and compute the required info below. Option 1: A single-payment loan due in 2 years. Interest is computed using the simple interest method (I=P*R* T). The annual interest rate is 12%. Option 2: A discounted loan due in 2 years. The discount/interest is computed using the discount method (D=P* R * T). The annual discount/interest rate is 12%. (Hint: The loan balance to be repaid is = to the sales price of the couch)
Lottery A pays $1,000 today and Lottery B pays $1,750 at the end of five years. If the discount rate is 5%, which lottery should you choose? ( Please show a detailed process) Lottery B, because its present value is $1,371 which is more than that of Lottery A. Lottery A, because its future value is $1,276. C.Lottery B, because it pays $1,750 which is more than $1,000 from Lottery A. Either option gives the same value over time.
Smith's Trailer Sales will finance a 16-foot utility trailer with ramps and electric brakes. If a down payment of $90 and eight monthly payments of $84.15 are required, what is the installment price of the trailer? The installment price is s
None
You purchase a home costing $480,000 with a 20% down payment. After shopping around for a mortgage, you select a lender who offers you two options for 30-year mortgages with monthly payments: Option I: A rate of 2.75% (APR) and an upfront fee (due immediately) of $3,840 Option II: A rate of 2.65% (APR) and an upfront fee (due immediately) of $9,600. a. Compute the monthly loan payment for each option. b. Compute the outstanding loan balance after 10 years for each option. c. If you prefer a lower true interest rate, which one should you choose? d. If you anticipate staying in the house for 10 years, which option should you choose?
The buyers paid $6,125 for a 1 point origination fee and a 1.5 discount point fee, what is the amount of their loan? If the buyers are obtaining an 80 percent LTV, what is the purchase price of their new home?
A new homeowner is purchasing a living room set for $2,590 and must decide between two financing offers.Offer 1: $200 down payment, 24.90% interest rate, compounded monthly, for 3 years, with no payments due for 6 months and then fixed payments of $121.96 for the remainder of the loan termOffer 2: $450 down payment, 22.90% interest rate, compounded monthly, for 3 years, with no payments due for 12 months and then fixed payments of $140.48 for the remainder of the loan termPart A: What is the total cost of offer 1?Part B: What is the total cost of offer 2? Part C: Which financing offer should the new homeowner choose?
You are considering the purchase of new living room furniture that costs $1,140. The store will allow you to make weekly payments of $25.12 for one year to pay off the loan. What is the EAR of this arrangment? Multiple Choice 27.39% 29.41% 32.99% 31.42%
What is the present value of $3,000 to be received 2 years from now, if the discount rate is: (a) 6%, (b) 10%, and (c) 13% ? 1. Use the appropriate table (Appendix C: Table 1) to answer the above questions. 2. Use the formula shown at the bottom of Appendix C. Table 1, to answer the above questions. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Use the formula shown at the bottom of Appendix C, Table 1, to answer the above questions, (Round "PV Factor" to 5 decimal places and "PV values" to 2 decimal places.) Future after-tax cash Bow Cash flow received at the end of year (a) (b) [(0) Answer is complete but not entirely correct. Rate 6% 10% 13% PV Factor 0.89000 $ 0.82645 $ 0.78315 S PV < Required 1 7,553 18,406 2,669.99 2,479.34 2,349 44 **
You open a new business and need a new laptop computer. You decide on a Knox Computer Solutions for $1499 due to the business software that is included. If the sales tax is 4.25% of the purchase price and you finance the total cost, including sales tax, for 3 years at the annual interest rate of 8.4%, find the monthly payment amount.
Hoover Corp., a wholesaler of music equipment, issued $11,200,000 of 20-year, 9% callable bonds on March 1, 20Y2, at their face amount, with interest payable on March 1 and September 1. The fiscal year of the company is the calendar year. Journalize the entries to record the following selected transactions. Refer to the Chart of Accounts for exact wording of account titles. 20Y2 Mar. 1 Issued the bonds for cash at their face amount. Sept. 1 Paid the interest on the bonds. 20Y4 Sept. 1 Called the bond issue at 102, the rate provided in the bond indenture. (Omit entry for payment of interest.)
Your uncle offers you a choice of $106,000 in 10 years or $43,000 today. Use Appendix B as an approximate answer, but calculate your final answer using the formula and financial calculator methods. a-1. If money is discounted at 9 percent, what is the present value of the $106,000? (Do not round intermediate calculations. Round your final answer to 2 decimal places.) Present value a-2. Which offer should you choose? $106,000 after 10 years O $43,000 today

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