Financial Accounting
9th Edition
ISBN: 9781259738692
Author: Libby
Publisher: MCG
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Chapter 9, Problem 9.17E
To determine
Identify the better deal for the given options in the present value terms.
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Consider the following two options proposed by an
auto dealer:
Option A: purchase the vehicle at the normal price of
$50,000 and pay for the vehicle over 48 months with
equal monthly payments at 3% APR financing.
Option B: purchase the vehicle at a discounted price
of $48,056.90 to be paid immediately. The funds that
would be used to purchase the vehicle are presently in
a savings account that earns 5% compounded
monthly.
Which option is more economically sound?
Option B
O None of these options is good
Option A
Options are equivalent (you are indefferent)
Suppose that after buying a new car you decide to sell your old car to a friend. You accept a 290-day note for $6500 at 20% simple interest as payment. (Both simple and principal interest are paid at the end of 290 days.) 100 days later you find that you need the money and sell the note to a third party for $5500. What annual interest rate will the third party receive for the investment? Express your answer as a percentage, correct to three decimal places.
your client wants to buy a new car. the financing terms are:
sticker price: 100,000.00 usd
cash discount of 21%
or 48 monthly payements with no interest:
calculate the effective annual rate that your client actually has to pay. you will need your financial calculator for this.
Chapter 9 Solutions
Financial Accounting
Ch. 9 - Prob. 1QCh. 9 - Prob. 2QCh. 9 - Prob. 3QCh. 9 - Prob. 4QCh. 9 - Prob. 5QCh. 9 - Prob. 6QCh. 9 - Prob. 7QCh. 9 - Define deferred revenue. Why is it a liability?Ch. 9 - Prob. 9QCh. 9 - Define working capital. How is working capital...
Ch. 9 - Prob. 11QCh. 9 - When a company signs a capital lease, does it...Ch. 9 - Prob. 13QCh. 9 - Define annuity.Ch. 9 - Prob. 15QCh. 9 - Prob. 16QCh. 9 - What is the present value factor for an annuity of...Ch. 9 - The university golf team needs to buy a car to...Ch. 9 - Which of the following best describes accrued...Ch. 9 - Prob. 4MCQCh. 9 - A company is facing a lawsuit from a customer. It...Ch. 9 - Which of the following transactions would usually...Ch. 9 - How is working capital calculated? a. Current...Ch. 9 - Prob. 8MCQCh. 9 - SmallFish Company borrowed 100,000 at 8% interest...Ch. 9 - Prob. 10MCQCh. 9 - Prob. 9.1MECh. 9 - Computing and Interpreting Accounts Payable...Ch. 9 - Prob. 9.3MECh. 9 - Prob. 9.4MECh. 9 - Prob. 9.5MECh. 9 - Prob. 9.6MECh. 9 - Prob. 9.7MECh. 9 - Prob. 9.8MECh. 9 - Prob. 9.9MECh. 9 - Computing the Present Value of an Annuity What is...Ch. 9 - Prob. 9.11MECh. 9 - Prob. 9.12MECh. 9 - Prob. 9.1ECh. 9 - Recording Payroll Costs Paul Company completed the...Ch. 9 - Prob. 9.3ECh. 9 - Recording a Note Payable through Its Time to...Ch. 9 - Prob. 9.5ECh. 9 - Prob. 9.6ECh. 9 - Prob. 9.7ECh. 9 - Prob. 9.8ECh. 9 - Reporting Contingent Liabilities Jones Soda is a...Ch. 9 - Prob. 9.10ECh. 9 - Prob. 9.11ECh. 9 - Prob. 9.12ECh. 9 - Computing Four Present Value Problems On January 1...Ch. 9 - Prob. 9.14ECh. 9 - Prob. 9.15ECh. 9 - Prob. 9.16ECh. 9 - Prob. 9.17ECh. 9 - Prob. 9.18ECh. 9 - Prob. 9.19ECh. 9 - Prob. 9.20ECh. 9 - Prob. 9.21ECh. 9 - Prob. 9.22ECh. 9 - Prob. 9.23ECh. 9 - Prob. 9.24ECh. 9 - Recording and Reporting Current Liabilities LO9-1...Ch. 9 - Prob. 9.2PCh. 9 - Prob. 9.3PCh. 9 - Recording and Reporting Accrued Liabilities and...Ch. 9 - Prob. 9.5PCh. 9 - Prob. 9.6PCh. 9 - Prob. 9.7PCh. 9 - Prob. 9.8PCh. 9 - Prob. 9.9PCh. 9 - Prob. 9.10PCh. 9 - Prob. 9.11PCh. 9 - Prob. 9.12PCh. 9 - Prob. 9.13PCh. 9 - Prob. 9.14PCh. 9 - ALTERNATE PROBLEMS AP9-1 Recording and Reporting...Ch. 9 - Prob. 9.2APCh. 9 - Prob. 9.3APCh. 9 - Prob. 9.4APCh. 9 - Prob. 9.5APCh. 9 - Prob. 9.6APCh. 9 - Prob. 9.7APCh. 9 - Prob. 9.8APCh. 9 - Prob. 9.1CONCh. 9 - Annual Report Cases Finding Financial Information...Ch. 9 - Finding Financial Information Refer to the...Ch. 9 - Prob. 9.3CPCh. 9 - Prob. 9.4CPCh. 9 - Prob. 9.5CP
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- Consider the following two options proposed by an auto dealer:• Option A: Purchase the vehicle at the normal price of $26,200 and pay forthe vehicle over 36 months with equal monthly payments at 1.9% APRfinancing.• Option B: Purchase the vehicle at a discounted price of $24,048 to be paid immediately.The funds that would be used to purchase the vehicle are presently earning 5% annual interest compounded monthly.Which option is more economically sound?arrow_forwardSuppose that you have decided to buy a certain car that costs $28,950, including taxes and license fees. The dealership gives you two financing options: 1) Option A: The dealership takes $800 off the price of the car. You must make a down payment of $2000 and can finance the rest at 2.99% APR for 72 months. a) How much will you be financing? b) How much will your monthly payments be under this option? (Round to the nearest dollar.) c) How much total money will you pay under this option? (Don’t forget to include your down payment.) 2) Option B: The dealership takes $1000 off the price and 0% financing for 36 months. a) How much will you be financing? b) How much will your monthly payments be under this option? (Round to the nearest dollar.) c) How much total money will you pay under this option? 3) Would you choose option A or option B? Why?arrow_forwardSuppose you would like to purchase a new mustang GT. The sticker price of the mustang you want is $40000. The dealer is able to give you an APR of 4% for 5 years. How much will your monthly payments be?How much will you have paid in interest once the loan is paid off?arrow_forward
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