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MindTap for Garman/Forgue's Personal Finance Tax Update, 13th Edition [Instant Access], 1 term
13th Edition
ISBN: 9780357438886
Author: GARMAN, E. Thomas, Forgue, Raymond
Publisher: Cengage Learning US
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Textbook Question
Chapter 5, Problem 4DTM
Saving for College. You want to create a college fund for a child who is now 3 years old. The fund should grow to $60,000 in 15 years. If an investment available to you will yield 6 percent per year, how much must you invest in a lump sum now to realize the $60,000 when needed? (Hint: Use Appendix A.2 or visit the Garman/ Forgue companion website.)
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1.
A project manager is using the payback method to make the final decision on which project
to undertake. The company has a 9% required rate of return and expects a 5% rate of
inflation for the following five years.
i.
ii.
What is the non-discounted payback of a project that has cash flows as shown in
the table?
What is the rate of return? (use equation given in class)
Cash Outflow Cash inflow Net Flow
Year
10
$500,000
0
1
12.
* 0
$75,000
&
$50,000
$150,000
3
$200,000
$350,000
4
0
$150,000
5
0
$750,000
Problem 4.
Consider the following balance sheet for Watchover Savings Incorporated (in millions):
Assets
Liabilities and Equity
Floating-rate mortgages (currently 12%
per annum)
Now deposits (currently 8% per
$ 82 annum)
$ 116
30-year fixed-rate loans (currently 9%
per annum)
5-year time deposits (currently 8% per
101 annum)
29
Equity
38
$ 183 Total
$ 183
Total
a. What is Watchover's expected net interest income at year-end?
b. What will be the net interest income at year-end if interest rates rise by 3 percent?
c. Using the one-year cumulative repricing gap model, what is the change in the expected net
interest income for a 3 percent increase in interest rates?
You are given the following information for Frankenson Pizza Company: Sales = $72,000; Costs = $32,300; Addition to retained earnings = $6,500; Dividends paid = $2,220; Interest expense = $5,200; Tax rate = 23 percent. Calculate the depreciation expense.
Note: Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.
Chapter 5 Solutions
MindTap for Garman/Forgue's Personal Finance Tax Update, 13th Edition [Instant Access], 1 term
Ch. 5.1 - Prob. 1CCCh. 5.1 - Explain the circumstances when it would be...Ch. 5.1 - Prob. 3CCCh. 5.1 - Summarize your insurance protections when you have...Ch. 5.2 - Explain why opening a checking account and a money...Ch. 5.2 - Prob. 2CCCh. 5.2 - Prob. 3CCCh. 5.2 - Prob. 4CCCh. 5.3 - Prob. 1CCCh. 5.3 - Prob. 2CC
Ch. 5.4 - Prob. 1CCCh. 5.4 - Prob. 2CCCh. 5.4 - Prob. 3CCCh. 5.4 - Prob. 4CCCh. 5.5 - Prob. 1CCCh. 5.5 - Prob. 2CCCh. 5 - Invest Now or Later? Twins Natalie and Kaitlyn are...Ch. 5 - Prob. 2DTMCh. 5 - Reconciling a Checking Account. Andrew Parker, of...Ch. 5 - Saving for College. You want to create a college...Ch. 5 - Prob. 5DTMCh. 5 - Prob. 1FPCCh. 5 - Prob. 2FPCCh. 5 - Prob. 3FPCCh. 5 - Prob. 4FPCCh. 5 - Prob. 5FPCCh. 5 - Prob. 6FPCCh. 5 - Prob. 7FPCCh. 5 - Prob. 8FPCCh. 5 - Keep Your Accounts Current. Go online every few...
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