Explanation Given: The budget summery of the Widget company for 2014, total receipts are $1,050,000, operating expenses are $600,000, employee benefits are $200,000 and security costs are $250,000. Calculation: a. From table 4.10 accumulated debt at the end of 2013 is $773,000. Thus using annual interest rate of 8.2% we get the 2014 interest payment as = $773,000 × (8.2/100) = $63,386. b. Total outlays for 2014 is the sum of 2013 accumulated debt interest, operating expenses, employee benefits and security costs i.e.=$63,386+$600,000+$200,000+$250,000 =$1,113,386 Thus, deficit for 2014 year-end= total outlays - total receipts =$1,113,386-$1,050,000 =$63,386 This gives year-end accumulated debt for 2014 = (year-end accumulated debit of 2013)+(2014 deficit) =$773,000+$63,386 =$836,386. c. Accumulated debt for 2014 year-end=$836,386 Thus at annual interest rate of 8.2% we get the 2014 interest payment as =$836,386 × (8.2/100) =$68584 d. It is given that operating expenses and employee benefits are same as those for 2014 i.e. $600,000 and $200,000 respectively. But, for 2015 security cost is $0. Thus, total outlays for 2015=(2014 debt interest)+$600,000+$200,000+$0 =$868,584 Total receipts for 2015 is $1,100,000...

Using and Understanding Mathematics: A Quantitative Reasoning Approach (6th Edition)

6th Edition

ISBN: 9780321914620

Author: Jeffrey O. Bennett, William L. Briggs

Publisher: PEARSON

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Chapter 4.F, Problem 17E

To determine

The wonderful widget company future.

a. Based on the accumulated debt at the end of 2013, calculate the 2014 interest payment. Assume an interest rate of 8.2%

b. Calculate the total outlays for 2014, the year-end surplus or deficit, and the year-end accumulated debt.

c. Based on the accumulated debt at the end of 2014, calculate the 2015 interest payment, again assuming an interest rate 8.2%

d. Assume that in 2015, the Widget Company has receipts of $1,100,000, holds operating costs and employee benefits to their 2014 levels and spends no money on security. Calculate the total outlays for 2015, the year-end surplus or deficits, and the year-end accumulated debt.

e. Imagine that you are the CFO of the Wonderful Widget Company at the end of 2015. Write a tree-paragraph statement to shareholders about the company’s future prospects.

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Chapter 4.F, Problem 16E

Chapter 4.F, Problem 18E

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Using and Understanding Mathematics: A Quantitative Reasoning Approach (6th Edition)

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