The formula is
A=p (1+r)^t
A future value 500000
P present value. ?
R interest rate 0.06
T time 11 years
Solve the formula for p by dividing both sides by (1+r)^t to get
P=A/(1+r)^t
P=500,000÷(1+0.06)^(11)
P=263,393.76
he should deposit 263393.76 now to attain 500000
Hope it helps!
Answer:
Option B,
The higher the degree of financial leverage employed by a firm, THE HIGHER THE PROBABILITY THAT THE FIRM WILL ENCOUNTER FINANCIAL DISTRESS.
Explanation:
The degree of financial leverage (DFL) is a leverage ratio that measures the sensitivity of a company's earnings per share to fluctuations in it's operating income, as a result of changes in its capital structure.
This ratio indicates that the higher the degree of financial leverage, the more volatile earnings will be.
The use of financial leverage varies greatly by industry and by the business sector. There are many industry sectors in which companies operate with a high degree of financial leverage (examples are retail stores, grocery store, banking institutions, airlines...). Unfortunately, the excessive use of financial leverage by many companies in this sector has played a major role in forcing a lot of them to file for bankruptcy.
Therefore, if the degree of financial leverage employed by a firm is high, then the probability that the firm will encounter financial distress will also be high.
Answer:
Cash Interest payable on Bond = $399,000*4.5% = $17,955
Discount to be amortized = ($399,000-$394,000)/20 = $250
Interest expense = $17,955+$250 = $18,205
Date Journal Entry Debit Credit
Interest Expense $18,205
Discount on bonds payable $250
Cash $17,955
