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lidiya [134]
3 years ago
13

Sheldon just joined a new gym and signed up for a one-year membership. Membership fees can be paid in 12 monthly payments of $60

, due at the beginning of each month or in one payment today. If the appropriate interest rate is 10%, how much should he pay today for the annual membership
Business
1 answer:
mestny [16]3 years ago
4 0

Answer: $688.17

Explanation:

He has to pay $60 every month on the first day or a lump sum.

The lump sum will be the present value of monthly payments.

This is a stable Cashflow and so is an Annuity and because it is done on the first day of the month it is an Annuity due.

Calculating present value of annuity due is;

= Annuity + Annuity (( 1 - ( 1 + r) ^ -(n - 1)) / r)

= 60 + 60 (( 1 - ( 1 + 0.833%)-¹¹) / 0.833%) )

=60 + 60* 10.4695

= $688.17

Note: interest rate must be divided into 12 to make it monthly rate.

=10%/12

= 0.833%

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TEME is a manufacturer of toy construction equipment. If it pays out all of its earnings as dividends, it will have earnings of
Virty [35]

Answer:

$8.078 million

Explanation:

we must use the same time periods, so instead of using an annual discount rate, we should use a quarterly rate:

effective quarterly interest = (1 + 0.16)¹/⁴ - 1 = 0.0378 = 3.78%

dividends per quarter = 0.3 million + 0.05 million = $0.35 million

terminal value of firm in quarter 4 = 0.35 / 0.0378 = $9.26 million

present value of terminal value = $9.26 / (1.0378)⁴ = $7.983 million

present value of 4 quarterly dividends = $0.3 x 3.64879 (PVIFA, 3.78%, 4 periods) = $1.095 million

NPV = -$1 + $1.095 + $7.983 = $8.078 million

4 0
3 years ago
Read 2 more answers
The following events apply to Montgomery Company for Year 1, its first year of operation:
Dmitry_Shevchenko [17]

Answer:

Montgomery Company

a. General Journal

1. Debit Cash $45,00

Credit Common stock $45,000

To record the issuance of common stock for cash.

2. Debit Accounts Receivable $64,000

Credit Service Revenue $64,000

To record the performance of services on account.

Debit Operating Expenses $9,700

Credit Accounts Payable $9,700

To record expenses incurred on account.

3. Debit Salaries Expense $37,000

Credit Cash $37,000

To record payment of salaries for cash.

4. Debit Dividend $4,600

Credit Cash $4,600

To record the payment of dividend to shareholders.

5. Debit Accounts Payable $7,100

Credit Cash $7,100

To record the payment on account

6. Debit Cash $42,500

Credit Accounts receivable $42,500

To record receipt of cash on account.

7. Debit Cash $11,100

Credit Service Revenue $11,100

To record the receipt of cash for services.

b. T-accounts:

Cash

Account Titles                  Debit     Credit

Common stock           $45,000

Salaries Expense                        $37,000

Dividend                                          4,600

Accounts Payable                            7,100

Accounts receivable    42,500

Service Revenue            11,100

Balance                                      $49,900

Common Stock

Account Titles           Debit     Credit

Cash                                      $45,000

Accounts Receivable

Account Titles           Debit     Credit

Service Revenue  $64,000

Cash                                     $42,500

Balance                                   21,500

Service Revenue

Account Titles           Debit     Credit

Accounts Receivable          $64,000

Cash                                         11,100

Balance                  $75,100

Operating Expenses

Account Titles           Debit     Credit

Accounts Payable  $9,700

Accounts Payable

Account Titles           Debit     Credit

Operating Expenses            $9,700

Cash                       $7,100

Balance                 $2,600

Salaries Expenses

Account Titles           Debit     Credit

Cash                       $37,000

Dividends

Account Titles           Debit     Credit

Cash                       $4,600

Explanation:

a) Data and Analysis:

1. Cash $45,000 Common stock $45,000

2. Accounts Receivable $64,000 Service Revenue $64,000

Operating Expenses $9,700 Accounts Payable $9,700

3. Salaries Expense $37,000 Cash $37,000

4. Dividend $4,600 Cash $4,600

5. Accounts Payable $7,100 Cash $7,100

6. Cash $42,500 Accounts receivable $42,500

7. Cash $11,100 Service Revenue $11,100

5 0
3 years ago
WILL MARK BRAINLIEST
PtichkaEL [24]

<h2>\sf {Question:}</h2>

Which professional code of conduct states that an accountant should act in a manner that will instill trust in the public?

…………………………………………………………………………

<h2>\sf{Answer:}</h2>
  • The Answer is A. Intergrity.
6 0
2 years ago
Hoffman Corporation issued $60 million of 9%, 15-year bonds at 106. Each of the 60,000 bonds was convertible into one share of $
Hatshy [7]

Answer:

Dr Cash $63,600,000

Cr Premium on Bonds $3,600,000

Cr Bonds payable $60,000,000

Explanation:

Preparation of the journal entry to record the issuance of the bonds.

Dr Cash $63,600,000

(106%*$60,000,000)

Cr Premium on Bonds $3,600,000

($63,600,000-$60,000,000)

Cr Bonds payable $60,000,000

(To record issuance of the bonds)

8 0
3 years ago
Filter Corp. maintains a debt-equity ratio of .45. The cost of equity is 14.7 percent, the pretax cost of debt is 8.1 percent, a
trapecia [35]

Answer:

11.78%

Explanation:

Weighted average cost of capital WACC determines firms cost of capital. It includes all sources of finance which are included in firms capital structure. The WACC is calculated with given formula:  

WACC = E/V Re + D/V * Rd (1 - T)

Re = cost of equity

V = Firms Market value of Debt and Equity

Rd = Cost of debt

E = market value of equity

D = market value of debt

T = Marginal Tax rate

WACC = 14.7 * 1 / 1.45 + 8.1 * 0.45 / 1.45 (1 - .34)

WACC = .1013 + 0.0165

WACC = 11.78%

7 0
3 years ago
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