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dybincka [34]
3 years ago
11

A father wants to save for his eight?year?old son�s college expenses. The son will enter college 10 years from now. An annual am

ount of $40,000 in constant dollars will be required to support the son�s college expenses for four years. Assume that these college payments will be made at the beginning of each school year. The future general inflation rate is estimated to be 6% per year, and the market interest rate on the savings account will average 8% compounded annually. (a) What is the amount of the son�s freshman?year expense in terms of actual dollars? (b) What is the equivalent single?sum amount at the present time for these college expenses? (c) What is the equal amount, in actual dollars, the father must save each year until his son goes to college?
Business
1 answer:
Ganezh [65]3 years ago
5 0

Answer:

Instructions are listed below

Explanation:

Giving the following information:

The son will enter college 10 years from now. An annual amount of $40,000 in constant dollars will be required to support the son's college expenses for four years.

The future general inflation rate is estimated to be 6% per year, and the market interest rate on the savings account will average 8% compounded annually

A) We need to find the present value for each 40,000-year expense.

Formula= FV/(1+i)^n

1: PV= 40,000/(1.06)^10= 22,335.80

2: PV= 40,000/(1.06)^11= 21,071.50

3: PV= 19,878.77

4: PV= 18,753.56

B) Total final value= 160,000

PV= 160,000/1.06^10= $89,343.16

C) We need to use the following formula:

FV= {A*[(1+i)^n-1]}/i

A= annual deposit

Isolating A:

A= (FV*i)/{[(1+i)^n]-1}

A= (160,000*0.06)/[(1.06^10)-1]= $12,138

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Ramsey Corporation desires to earn target net income of $90,000. If the selling price per unit is $30, unit variable cost is $24
Stels [109]

Answer:

b. 75,000 units

Explanation:

Fixed cost = $360,000

Target net income = $90,000

Selling price per unit = $30

Unit variable cost = $24

The computation of net income is shown below :-

= (Fixed expenses + target profit) ÷ (Contribution margin per unit)

where,  

Contribution margin per unit = Selling price per unit - Variable expense per unit

= $30 - $24

= $6

So, the net income is

= ($360,000 + $90,000) ÷ ($6)

= ($450,000) ÷ ($6)

= 75,000 units

7 0
3 years ago
The Burkes pay their babysitter​ $5 per hour before 11 P.M. and​ $7.50 after 11 P.M. One evening they went out for 4 hr and paid
stiks02 [169]

Answer:

They came back home at 12 pm

Explanation:

Giving the following information:

The Burkes pay their babysitter​ $5 per hour before 11 P.M. and​ $7.50 after 11 P.M. One evening they went out for 4 hr and paid the sitter ​$27.50.

We need to formulate the total cost:

TC= 5*x + 7.5*y

x=5*4= 20

y=7.5*1= 7.5

TC= 5*4 + 7.5*1= $27.5

They came back home at 12 pm

4 0
3 years ago
In order to offset the competitive disadvantage of FOB plant pricing, Texas Granite Company in Dallas could use _____ pricing to
ozzi

Answer:

Freight-absorption

Explanation:

Based on the information provided within the question it can be said that the Texas Granite Company in Dallas should use Freight-absorption pricing in this situation. This is a pricing strategy in which the seller takes responsibility for all the freight charges that the company incurs in order to attract the amount of business that they hope to achieve. Since company's that are looking to buy see 0 freight charges it becomes a deal since they are saving money as opposed to buying from another company that charges the freight charges to the buyer.

6 0
2 years ago
A company issued $50,000 of 8%, 10-year bonds on January 1. The bonds pay semi annual interest. The present value factor of a si
inessss [21]

Answer:

$22,820

Explanation:

Calculation to determine Determine the present value of the par value of the bonds.

Discount rate =8%/2

Discount rate= 4%

Present value factor of 20 periods at 4%= ( 1 / 1.04^20 )

Present value factor of 20 periods at 4%=0.4564

Using this formula

Present value of the par value of the bond = Future value of the bond x Present value factor =

Let plug in the formula

Present value of the par value of the bond=$50,000 x 0.4564

Present value of the par value of the bond = $22,820

Therefore the present value of the par value of the bonds is $22,820

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Increased optimism about the future will lead to Multiple Choice
iragen [17]

Answer:

C

Explanation:

more current investment and more future consumption.

8 0
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