Financial Accounting
3rd Edition
ISBN: 9780133791129
Author: Jane L. Reimers
Publisher: Pearson Higher Ed
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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?
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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%.
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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%.
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b. Is it cheaper to buy or lease?
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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
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