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Alla [95]
4 years ago
15

You invest $1,000 today and expect to sell your investment for $2,000 in 10 years. (LO5-1) a. Is this a good deal if the interes

t rate is 6%? b. What if the interest rate is 10%?
Business
1 answer:
3241004551 [841]4 years ago
3 0

Answer:

If the interest rate is 6%,then selling the investment for $2,000 is a good deal.

If the interest rate is 10%, then selling the investment for $2,000 is a bad deal.

Explanation:

If  the interest rate is 6% then compounded yearly for 10 years 1,000 should have a future value of

1000*1.06^10=1,790

SO if the interest rate is 6% then in 10 years the investment should have a future value of 1,790  and selling it for $2,000 is a very good deal as you are making more than 6% per year which is the interest rate.

Now if the interest rate is 10% the future value will be

1,000*1.1^10=2593

Now the future value is more than 2,000 which means that we will be earning less than the interest rate, which means it is a bad deal.

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Assume the smart watch industry is a perfectly competitive industry that uses a specialized input. If this industry experiences
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Option B, both input and output prices will increase

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Prepare a multiple-step income statement for Surry Co. from the following data for the year ended December 31, 2016. Sales $915,
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Answer:

                                          Surry Co.

Income Statement for the year ended December 31, 2016

Sales                                                                      $915000

Less Cost of Merchandise Sold                           $670000

Gross Profit                                                            $245000

<u>LESS OPERATING INCOME</u>

<u><em>Selling Expenses</em></u>

Customer Refunds and allowances   $  55000

Selling expenses                                 $ 120000  $175000

<u><em>Administrative Expenses</em></u>

Administrative expenses                     $ 30000   $30000

Total Operating expenses                                   $205000

Operating Income                                                 $ 40000

<u>NON-OPERATING INCOME</u>

Interest Expense                                 ($12000)    

Rent Revenue                                      $19000  

Total Non-operating Income                                 $  7000

Net Income                                                             $47000

Explanation:

A multiple-step Income Statement separate Operating Revenues and Operating Expenses from Non-Operating Revenues and Non-Operating Expense.

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