Financial Accounting (12th Edition) (What's New in Accounting)
12th Edition
ISBN: 9780134725987
Author: C. William Thomas, Wendy M. Tietz, Walter T. Harrison Jr.
Publisher: PEARSON
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Chapter F, Problem 4QC
To determine
To identify: The present value of $50,000 winnings over 20 years, estimating the earnings at a 5% on investments.
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A lottery winner will receive
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B.
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A new investment opportunity for you is an annuity that pays $650 at the beginning of each year for 3 years. You could earn 5.5% on your money in other investments with equal risk. What is the most you should pay for the annuity?
Select the correct answer.
a. $1,903.81
b. $1,885.91
c. $1,850.11
d. $1,832.21
e. $1,868.01
A lottery winner will receive $1 million at the end of each of the next ten years. What is the future value (FV) of her winnings at the time of her final payment, given that the interest rate is 8.5% per year? A. $14.84 million B. $19.95 million C. $18.95 million D. $13.84 million
Chapter F Solutions
Financial Accounting (12th Edition) (What's New in Accounting)
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- An individual wins a lottery prize of £3,000 payable every 6 months in arrears for 10 years. What is the present value of the cashflow at an effective interest rate of 3.5% per annum? Select one: a. £50,203.2 b. £50,332.5 c. £51,335.2 d. E53,532.3arrow_forwardIf you invest $1,127 at the end of each year for 6 years and you earn 14% interest compounded annually, how much will you have accumulated to the nearest dollar? Group of answer choices $10,581 $8,802 $9,860 $9,620 ......arrow_forwardYou invest $50,000 for three years that will earn 3.6 percent compounded continuously. What will be the value of your investment after three years?A. $51,832.B. $55,702. C. $55,596. USE EXCELarrow_forward
- Question: Assume you can earn 7% on the investments described below. How much money would each investment provide for you after six years? Invest $5,000 as a lump sum today. Invest $2,000 at the end of each of the next six years.arrow_forwardA.You just inherited some money, and a broker offers to sell you an annuity that pays $16,800 at the end of each year for 20 years. You could earn 5% on your money in other investments with equal risk. What is the most you should pay for the annuity? a. $209,365.13 b. $180,054.02 c. $255,425.46 d. $244,957.21 e. $236,582.60 B. New Business is just being formed by 10 investors, each of whom will own 10% of the business. The firm is expected to earn $1,000,000 before taxes each year. The corporate tax rate is 34% and the personal tax rate for the firm's investors is 35%. The firm does not need to retain any earnings, so all of its after-tax income will be paid out as dividends to its investors. The investors will have to pay personal taxes on whatever they receive. How much additional spendable income will each investor have if the business is organized as a partnership rather than as a corporation? a. $20,332 b. $19,006 c. $22,763…arrow_forwardIf you invest $8,000 at the end of every year for nine years at an interest rate of 8%, the balance of your investment in 3 years will be closest to Future Value of $1 Periods 3 4 5 5% 1.150 1216 1276 1.340 Future Value of Annuity of $1 Periods 5% 3 3.153 4 4.310 A. $25,968 OB. $10,080 OC. $24,000 OD. $20,616 6% 1.191 1.262 1.338 1.410 6% 3 184 4.375 8% 1.200 1.360 1.400 1.587 8% 3.246 4.506 10% 1.331 1.464 1611 1.772 10% 3.310 4.641arrow_forward
- harrow_forwardIf you invest $5,000 three years from now, how much will be in h 15 f if 10% d d ll ? the account 15 years from now if i = 10% compounded annually? a. $8,053 b. $15,692 c. $20,886 d. $27,800.arrow_forwardSuppose you borrowed $25, 000 at a rate of 9.0% and must repay it in 4 equal installments at the end of each of the next 4 years. How large would your payments be? Select the correct answer. a. $7, 703.52 b. $7, 729.92 c. $7, 716.72 d. $7, 736.52 e. $7,723.32arrow_forward
- An investment pays $200 at the end of Year I. $250 at the beginning* of Year 2. $387 at the end of Year 4. and $500 at the beginning of Year 6. If other investments of equal Mk earn 7.5% annually. what will be this investments present value and future value?arrow_forwardSuppose you inherited $1,135,000 and invested it at 8.25% per year. How much could you withdraw at the beginning of each of the next 20 years? a. $117,761.21 b. $108,786.34 c. $111,148.74 d. $22,285.19 e. $93,637.50arrow_forwardq5. An investment product will provide a cash flow of $613 at the end of each year for the following 18 years. At a discount rate of 8 percent, what does this investment worth to you today? Answer: $ q6. If you purchase an investment at $51,401 today, in return, you will receive a(n) 12 percent, 20 - year annuity. What will the annual cash flow be? Answer: $ q7. Your bank account offers an annual interest rate of 1.0% that compounds monthly. What is the effective annual rate (EAR) for your accountarrow_forward
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