Civil engineering consulting firms that provide services to outlying communitiesare vulnerable to a number of factors that affect the financial condition of the communities,such as bond issues, real estate developments, etc. A small consulting firm entered into afixed-price contract with a spec home builder, resulting in a stable income of $360,000per year in years 1 through 5. At the end of that time, a mild recession slowed thedevelopment, so the parties signed another contract for $185,000 per year for 5 moreyears. Determine the present worth of the two contracts at an interest rate of 13% per year.The present worth of the two contracts is determined to be $

We can determine the PV of each cash flow using the formula below:In the formula above CFn = cash…

Answered: The present worth of the two contracts…

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Current Attempt in Progress During 2020, Pronghorn Corporation started a construction job with a contract price of $4.62 million. Pronghorn ran into severe technical difficulties during construction but managed to complete the job in 2022. The contract is non-cancellable. Under the terms of the contract, Pronghorn sends billings as revenues are earned. Billings are non-refundable. The following information is available: Costs incurred to date Estimated costs to complete 2020 $660.000 3,465,000 2021 $2,310,000 2,310.000 2022 $4,520,000 -0- Billings for the construction contract were as follows: 2020, $560,000; 2021, $2.150,000; and 2022, $1,910,000. Calculate the balance of the Contract Asset/Liability account at the end of each year using the percentage-of-completion method. (Do not leave any answer field blank. Enter O for amounts)
3. Entity A entered a 3-year lease on 1.1.20X4 for the lease of machine A from entity Z. The lessor purchased the machine in cash for the lessee for €15,656.60. The machine was to be used in the production process and will be returned to entity Z at the end of the contract. On the basis of the signed contract, The rent will be annual, amounting to 6000€ and will be paid at the end of each year. The interest rate was set at 12% and the guaranteed residual value amounts to €1750. The following are requested: a. To show in a table the annual payments of economic entity A, broken down, as appropriate, into annual rent, interest-costs, and leasing liabilities; b. Make accounting entries on the lessee's side (entity A); c. Make accounting entries on the lessor's side (entity Z)
For which of the following transactions would the use of the present value of an ordinary annuity concept be appropriate in calculating the present value of the asset obtained or the liability owed at the date of incurrence? Group of answer choices 1)A capital lease is entered into with the initial lease payment due one month subsequent to the signing of the lease agreement. 2)A capital lease is entered into with the initial lease payment due upon the signing of the lease agreement. 3)A ten-year 8% bond is issued on January 2 with interest payable semiannually on January 2 and July 1 yielding 7%. 4)A ten-year 8% bond is issued on January 2 with interest payable semiannually on January 2 and July 1 yielding 9%.
A , B and C bind themselves to pay D P30,000. Only A received the money as per agreement between A, B and C. On the due date of the obligation, has D the right to demand the full payment of P30,000 from C alone? C and D bind themselves to pay E their loan of 10,000 on a certain date. Is the obligation divisible or indivisible?
It is the sum of the first cost, and the present worth of all cost of replacement, operation, and maintenance for a long time forever. Annual cost Perpetuity Annuity Capitalized Cost
Perpetuities are also called annuities with an extended or unlimited life. Based on your understanding of perpetuities, answer the following questions. Which of the following are characteristics of a perpetuity? Check all that apply. In a perpetuity, returns—in the form of a series of identical cash flows—are earned. A perpetuity continues for a fixed time period. A perpetuity is a series of regularly timed, equal cash flows that is assumed to continue indefinitely into the future. The principal amount of a perpetuity is repaid as a lump-sum amount. Your grandfather wants to establish a scholarship in his father’s name at a local university and has stipulated that you will administer it. As you’ve committed to fund a $15,000 scholarship every year beginning one year from tomorrow, you’ll want to set aside the money for the scholarship immediately. At tomorrow’s meeting with your grandfather and the bank’s representative, you will need to deposit…
Ivanhoe Company leases a machine from Vollmer Corp. under an agreement which meets the criteria to be a finance lease for Ivanhoe. The six-year lease requires payment of $172000 at the beginning of each year, including $25200 per year for maintenance, insurance, and taxes. The incremental borrowing rate for the lessee is 10%; the lessor’s implicit rate is 8% and is known by the lessee. The present value of an annuity due of 1 for six years at 10% is 4.79079. The present value of an annuity due of 1 for six years at 8% is 4.99271. Ivanhoe should record the leased asset at 824016 858746 732930 703288
Show Present value of a) Lump Sum and b) annuity
Many assets provide a series of cash inflows over time; and many obligations require a series of payments. When the payments are equal and are made at fixed intervals, the series is an annuity. There are three types of annuities: (1) Ordinary (deferred) annuity, (2) Annuity due, and (3) Growing annuity. One can find an annuity's future and present values, the interest rate built into annuity contracts, and the length of time it takes to reach a financial goal using an annuity. Growing annuities are often used in the area of financial planning. Their analysis is more complex and often easier solved using a financial spreadsheet, so we will limit our discussion here to the first two types of annuities. The future value of an ordinary annuity, FVAN, is the total amount one would have at the end of the annuity period if each payment (PMT) were invested at a given interest rate and held to the end of the annuity period. The equation is: FVAN= PMT Each payment of an annuity due is compounded…
Each of the four independent situations below describes a finance lease in which annual lease payments are payable at the beginning of each year. The lessee is aware of the lessor's implicit rate of return. Note: Use tables, Excel, or a financial calculator. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) Situation 1 2 3 4 Lease term (years) Lessor's rate of return. 5 10% 8 11% 6 9 9% 12% Fair value of lease asset $ 67,000 $ 367,000 $ 92,000 Lessor's cost of lease asset $ 67,000 $ 367,000 $ 62,000 $ 482,000 $ 482,000 Residual value: Estimated fair value Guaranteed fair value 0 $ 67,000 $ 24,000 $ 36,000 0 0 $ 24,000 $ 41,000 Required: a. & b. Determine the amount of the annual lease payments as calculated by the lessor and the amount the lessee would record as a right-of-use asset and a lease liability, for each of the above situations. Note: Round your answers to the nearest whole dollar amount. Lease Payments Residual Value PV of Lease Guarantee Payments PV of…
Mr. Waqas obtains an asset under Ijarah from an Islamic bank. The asset has a value at the start of the contract of PKR 68,000 and is estimated to have a useful economic life of 3. The contract starts on 1 January Year 1 and lasts 3 years; the trader does not have the option to cancel the contract early. The trader agrees to pay equal monthly installments, and the first payment made by the trader will be at the start of the contract. Furthermore, the trader will pay the residual value at the end of the third year and will purchase the asset. The estimated value of the asset after 3 years is PKR 10,000, and this is also the guaranteed minimum value of the asset at the end of year 3. The profit rate by the bank is 10%. Required: Calculate monthly payments and Islamic Bank’s profit
The Harris Company is the lessee on a four-year lease with the following payments at the end of each year: Year 1 : $18,000 Year 2: $23,000 Year 3: $28,000 Year 4: $33,000 An appropriate discount rate is 7%, yielding a present value of $84,943. If the lease is an operating lease, what will be the initial value of the right-of-use asset?

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