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vova2212 [387]
3 years ago
13

Slick Sam has a special relationship with his banker. The nature of the relationship is as follows: The bank owes Sam $100 per y

ear forever. The 1st payment is due in 1 year. The bank will borrow or lend money to Sam at a constant effective rate of i per year. Today, Sam calculated the present value of the payments that are due to him as X. Sam can receive his first 16 payments at the end of year 16 in a lump sum. If he does that, then the total value of the lump sum and future payments at the end of the sixteenth year is X + 2,000. Calculate X.
Business
1 answer:
joja [24]3 years ago
7 0

Answer:

X=97.24

Explanation:

PV = Present Value = X+2000 by the 16th years

PMT = Payments = $100

FV = Future Value = 2000 at the end of 16 years

n= number of years

Applying the equation of future value for annuity

FV = pmt* ​((1+r)ⁿ - 1   )/r

Inputting the values;

2000=100*((1+r)¹⁶-1)/r

Solving for r, gives r = 2.9%

Therefore using the formula for PV for annuity;

PV=PMT*(1-(1/1+r)/r)

X=100*(1-(1/1.029)/0.029

X=100*((1-0.9718)/0.029)

X=100*(0.0282/0.029)

X=97.24

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On january 2, fafnir co. purchased a franchise with a finite useful life of 10 years for $50,000. an additional franchise fee of
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Since, no other methods of amortization are specifically mentioned, straight line method will be used.

Book value of Franchise = Purchase price - Amortization expenses

Book value of Franchise = $ 50,000 - [ ( $ 50,000 - $ 0) / 10 Years ]

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7 0
3 years ago
A bank can offer which of the following
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Answer:

Checking Account, Savings Account, Safety Deposit Box

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Banks are financial institutions that provide a wide variety of financial services to their customers. They accept customer deposits and issue loans. Commercial banks act as intermediaries between the supply side and demand side of credit.

Commercial banks are also known as deposit-taking institutions. Deposits facilities offered by banks include

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8 0
3 years ago
Suppose a farmer in Georgia begins to grow peaches. He uses​ $1,000,000 in savings to purchase​ land, he rents equipment for ​$1
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Answer:

-$475,000

Explanation:

Total revenue = Baskets of peaches × Price

                       = 100,000 × $3

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Explicit cost:

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= $100,000 + $100,000

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= Land × Interest + salesman earned

=  $1,000,000 × 0.55 + $25,000

= $575,000

Total cost = Explicit cost: + Implicit cost

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Economic profit = Total revenue - Total cost

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                           = -$475,000

8 0
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8 0
3 years ago
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