Financial Accounting
3rd Edition
ISBN: 9780133791129
Author: Jane L. Reimers
Publisher: Pearson Higher Ed
expand_more
expand_more
format_list_bulleted
Textbook Question
Chapter 7A, Problem 2SEB
Present value. (LO 8). Able Company has offered to sell Cane Company some used office equipment. Able wants Cane to pay $100 per quarter (three-month period) for the next three years, with the payment due at the end of each quarter. Suppose the appropriate discount rate is 4. What is the actual sale price of the office equipment?
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solutionStudents have asked these similar questions
Your landscaping company can lease a truck for $7,200 a year (paid at year-end) for 6 years. It can instead buy the truck for $35,000. The truck will be valueless after 6 years. The interest rate your company can earn on its funds is 7%.
a. What is the present value of the cost of leasing? (Do not round intermediate calculations. Round your answer to 2 decimal places.)
b. Is it cheaper to buy or lease?
c. What is the present value of the cost of leasing if the lease payments are an annuity due, so the first payment comes immediately? (Do not round intermediate calculations. Round your answer to 2 decimal places.)
d. Is it now cheaper to buy or lease?
Your landscaping company can lease a truck for $8,200 a year (paid at year-end) for 5 years. It can instead buy the truck for $35,000. The truck will be valueless after 5 years. The interest rate your company can earn on its funds is 6%.
a. What is the present value of the cost of leasing? (Do not round intermediate calculations. Round your answer to 2 decimal places.)
b. Is it cheaper to buy or lease?
c. What is the present value of the cost of leasing if the lease payments are an annuity due, so the first payment comes immediately? (Do not round intermediate calculations. Round your answer to 2 decimal places.)
d. Is it now cheaper to buy or lease?
Your landscaping company can lease a truck for $8,400 a year (paid at year-end) for 7 years. It can instead buy the truck for $44,000. The truck will be valueless after 7 years. The interest rate your company can earn on its funds is 8%.
a. What is the present value of the cost of leasing? (Do not round intermediate calculations. Round your answer to 2 decimal places.)
b. Is it cheaper to buy or lease?
c. What is the present value of the cost of leasing if the lease payments are an annuity due, so the first payment comes immediately? (Do not round intermediate calculations. Round your answer to 2 decimal places.)
d. Is it now cheaper to buy or lease?
Your landscaping company can lease a truck for $8,400 a year (paid at year-end) for 7 years. It can instead buy the truck for $44,000. The truck will be valueless after 7 years. The interest rate your company can earn on its funds is 8%.
a. What is the present value of the cost of leasing? (Do not round intermediate calculations. Round…
Chapter 7A Solutions
Financial Accounting
Ch. 7A - Prob. 1YTCh. 7A - Suppose Action Company issues a 1,000, 10-year,...Ch. 7A - Suppose HPS Company issues a 1,000 face value,...Ch. 7A - Present value. (LO 8). Suppose you want to have...Ch. 7A - Present value. (LO 8). Able Company has offered to...Ch. 7A - Calculate payments using time value of money...Ch. 7A - Calculate payments using time value of money...Ch. 7A - Prob. 5PACh. 7A - Prob. 6PB
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Similar questions
- Your company is planning to purchase a new loader for $20,937. If the company keeps the old loader, it will have $1,959 additional maintenance cost for the first year and increases $308 each year till the eighth year. Given the company's minimum attractive rate of return (MARR) is 6%, what is the present cost of keeping the old loader? 6% 1 2 3 4 5 879 6 9 Single Payment Compound Present Amount Worth Factor Factor Find F Find P Given F Given P F/P P/F 1.060 1.124 1.191 1.262 1.338 1.419 1.504 1.594 1689 .9434 .8900 .8396 .7921 .7473 .7050 .6651 .6274 5919 Sinking Fund Factor Find A Given F A/F 1.0000 .4854 3141 .2286 .1774 .1434 .1191 1010 0870 Compound Interest Factors Uniform Payment Series Capital Recovery Factor Find A Given P A/P 1.0600 .5454 .3741 .2886 2374 2034 .1791 1610 1470 Compound Amount Factor Find F Given A F/A 1.000 2.060 3.184 4.375 5.637 6.975 8.394 9.897 11 491 Present Worth Factor Find P Given A P/A 0.943 1.833 2.673 3.465 4.212 4.917 5.582 6.210 6.802 Arithmetic…arrow_forwardThe Wildwood Widget Company needs a milling machine for its new assembly line. The machine presently costs $85,000, but has a cost inflation rate of 2%. Widget will not need to purchase the machine for 3 years. If general inflation is expected to be 4% per year during those 3 years, determine the price of the machine. What is the present worth of the machinery if the market rate of interest for Widget is 25%?arrow_forwardA firm can lease a truck for 4 years at a cost of $30,000 annually. It can instead buy a truck at a cost of $80,000, with annual maintenance expenses of $10,000. The truck will be sold at the end of 4 years for $20,000. What is the equivalent annual cost of buying and maintaining the truck if the discount rate is 10%? Note: Do not round intermediate calculations. Round your answer to 2 decimal places.arrow_forward
- Consider the rental rate of capital for an appliance rental company such as Rent-A-Center. Suppose Rent-A-Center buys televisions at the market price (P) of $3,500 each and rents them out to customers. The company faces an interest rate (r) of 15% per year, and televisions depreciate at 15% per year. Fill in the following table with the interest cost per year and the loss due to wear and tear for each television per year. Borrowing cost per year Depreciation cost G Cost (Dollars per television) Assume that firms renting televisions earn zero profit. Using the information in the previous table, the rental rate of capital, in this case, is per year per television. s to Suppose the depreciation rate decreases due to improvements in the materials used to make televisions. This should cause the equilibrium rental rate Show Transcribed Text The last question option is either "Increase" or "Decrease".arrow_forwardPlease answer this question correctly ASAP. Thank you.arrow_forwardCan you help me with this problem with step by step explanation, please?arrow_forward
- A company is considering the end of the year rental of a copying machine that costs P 1,000 the first year, and increasing by P 200 every year there after up to the fifth year. What is the equivalent amount to be paid at the end of the first year of all the rentals? Use i = 10%. Choices:a. P 2,660b. P 5,163 c. P 5,679d. P 2,418 Show solution. Do not use excel. Ans Carrow_forwardA firm can lease a truck for 5 years at a cost of $39,000 annually. It can instead buy a truck at a cost of $89,000, with annual maintenance expenses of $19,000. The truck will be sold at the end of 5 years for $29,000. a. What is the equivalent annual cost of buying and maintaining the truck if the discount rate is 12%? Note: Do not round intermediate calculations. Round your answer to 2 decimal places. Equivalent annual cost $ 20,317.57 b. Which is the better option? O Buy Leasearrow_forwardA firm can lease a truck for 4 years at a cost of $38,000 annually. It can instead buy a truck at a cost of $88,000, with annual maintenance expenses of $18,000. The truck will be sold at the end of 4 years for $28,000. a. What is the equivalent annual cost of buying and maintaining the truck if the discount rate is 16%? Note: Do not round intermediate calculations. Round your answer to 2 decimal places. Equivalent annual cost I b. Which is the better option? Lease Buyarrow_forward
- Use the following information for the next TWO (2) questions: A farm must decide whether or not to purchase a new tractor. The tractor will reduce costs by P2, 000 in the first year, P2, 500 in the second, and P3, 000 in the third and final year of usefulness. The tractor costs P9, 000 today, wihile the above cost savings will be realized at the end of each year. If the interest rate is 7 percent. QUESTION NO. 3 What is the present value of cash inflaw from purchasing the tractor? Your answer QUESTION NO.4 What is the net present volue of purchasing the tractor, accept or reject? Your ariswerarrow_forwardA firm can lease a truck for 5 years at a cost of $49,000 annually. It can instead buy a truck at a cost of $99,000, with annual maintenance expenses of $29,000. The truck will be sold at the end of 5 years for $39,000. a. What is the equivalent annual cost of buying and maintaining the truck if the discount rate is 12%? Note: Do not round intermediate calculations. Round your answer to 2 decimal places. Answer is complete but not entirely correct. Equivalent annual cost S 35,501.30x b. Which is the better option? Buy Leasearrow_forwardPlease solve for all sub-parts of the question displayed on image.arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
- Principles of Accounting Volume 2AccountingISBN:9781947172609Author:OpenStaxPublisher:OpenStax CollegeIntermediate Financial Management (MindTap Course...FinanceISBN:9781337395083Author:Eugene F. Brigham, Phillip R. DavesPublisher:Cengage Learning
Principles of Accounting Volume 2
Accounting
ISBN:9781947172609
Author:OpenStax
Publisher:OpenStax College
Intermediate Financial Management (MindTap Course...
Finance
ISBN:9781337395083
Author:Eugene F. Brigham, Phillip R. Daves
Publisher:Cengage Learning
Debits and credits explained; Author: The Finance Storyteller;https://www.youtube.com/watch?v=n-lCd3TZA8M;License: Standard Youtube License