Answer:
Instructions are listed below.
Explanation:
Giving the following information:
A friend of Mr. Richards recently won a law suit for $30 million. They can either take the payments over 10 years or settle today for cash of $25 million. Mr. Richard is optimistic that he can earn a 6% return on the money and that they should settle for $25 million today and he will invest it for them.
First, we need to find the present value of the 30 million.
To do that we need to calculate the final value.
FV= {A*[(1+i)^n-1]}/i
A= annual deposit
FV= {3,000,000*[(1.06^10)-1]}/0.06= 39,542,385
PV= FV/(1+i)^n= 39,542,385/1.06^10= 22,080,261
B) Now we know that the present value of option B is higher. One dollar today is better than one dollar tomorrow. It is better to receive the money now to invest it.
Answer:
c. $9.50 each.
Explanation:
For computing the selling price, first we have to compute the total price of three cakes which is shown below:
The sale value of three cakes would be
= $3 per cake × 3 cakes
= $9
And, the producer surplus is $19.50
So, the total price of cake equals to
= $9 + $19.50
= $28.50
And, the number of cake is 3
So, the selling price would be
= $28.50 ÷ 3 cakes
= $9.50 each
Answer: Current Price $26.65
Explanation:
Rate of return = 12.5%
dividends = $1.98
Expected Price (in a year from now) Pe= $28
Current price = Pc
R = (Pe - Pc + D)/Pa
0.1250 = (28 - Pc + 1.98)/Pc
28 - Pc + 1.98 = 0.1250Pc
-Pc - 0.1250Pc = - 28 - 1.98
- 1.125Pc = -29.98
Pc = -29.98/(-1.1250Pc) = 26.64888889
Pc = $ 26.65
Answer:
The cash collection on September 9 is records by the entry:
Debit Cash $5,300
Credit Accounts Receivable $5,300
Explanation:
Barnes Books allows for possible bad debts. On May 7, the company writes off a customer account. The journal entry:
Debit Allowance for Doubtful Accounts $5,300
Credit Accounts Receivable $5,300
On September 9, the customer unexpectedly pays the $5,300 balance. The journal entries:
1. Debit Accounts Receivable $5,300
Credit Allowance for Doubtful Accounts $5,300
2. Debit Cash $5,300
Credit Accounts Receivable $5,300
