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Andrew [12]
3 years ago
5

Sam was injured in an accident, and the insurance company has offered him the choice of $25,000 per year for 15 years, with the

first payment being made today, or a lump sum. If a fair return is 7.5%, how large must the lump sum be to leave him as well off financially as with the annuity
Business
1 answer:
stiv31 [10]3 years ago
6 0

Answer:

The lump sum be of $237,228.84

Explanation:

In order to calculate how large must the lump sum be we would have to use  and calculate the formula of Present value of annuity due as follows:

Present value of annuity due=(1+interest rate)*Annuity[1-(1+interest rate)^-time period]/rate

Present value of annuity due=(1+0.075)*$25,000[1-(1.075)^-15]/0.075

Present value of annuity due=$25,000*9.489153726

Present value of annuity due=$237,228.84(Approx)

The lump sum be of $237,228.84

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3 years ago
Read 2 more answers
Valley Technology Balance Sheet As of March 11, 2020 (amounts in thousands) Cash 9,700 Accounts Payable 1,500 Accounts Receivabl
ollegr [7]

Answer:

total liabilities = accounts payable $11,500 + unearned revenue $7,500 + debt $65,900 + other liabilities $800 = $85,700

Explanation:

Cash 9,700 Accounts Payable 1,500 Accounts Receivable 4,500 Debt 2,900 Inventory 3,800 Other Liabilities 800 Property Plant & Equipment 16,400 Total Liabilities 5,200 Other Assets 1,700 Paid-In Capital 7,300 Retained Earnings 23,600 Total Equity 30,900 Total Assets 36,100 Total Liabilities & Equity 36,100

1. Buy $15,000 worth of manufacturing supplies on credit

Supplies                                           Accounts payable

debit                credit                       debit                credit

15,000                                                                       1,500

                                                         <u>                         15,000</u>

                                                                                  16,500

2. Issue $85,000 in stock

Cash                                                 Paid-In Capital

debit                credit                       debit                credit

9,700                                                                        7,300

<u>85,000                        </u>                     <u>                        85,000</u>

94,700                                                                     92,300

3. Borrow $63,000 from a bank

Cash                                                 Debt

debit                credit                       debit                credit

94,700                                                                      2,900

<u>63,000                         </u>                    <u>                        63,000</u>

157,700                                                                    65,900

4. Pay $5,000 owed to a supplier

Cash                                                 Accounts payable

debit                credit                       debit                credit

157,700                                                                     16,500

<u>                         5,000  </u>                    <u>5,000                          </u>

152,700                                                                     11,500

5. Receive payment of $12,000 owed by a customer

Cash                                                 Accounts receivable

debit                credit                       debit                credit

152,700                                            4,500                        

<u>12,000                         </u>                     <u>                         12,000</u>

164,700                                                                     7,500

Due to some strange reason, accounts receivable has a debit balance (= $4,500 - $12,000). Since that is not possible, the remaining part $7,500 must be included under unearned revenue:

Accounts receivable                       Unearned revenue

debit                credit                       debit                credit

                        7,500                                               0                        

<u>7,500                         </u>                       <u>                         7,500</u>

0                        0                                                      7,500

 

7 0
3 years ago
Which of the following statements is true? Total revenue will equal zero when the demand for a product is unit elastic. When a f
Gre4nikov [31]

Answer:

Total revenue will equal zero when the demand for a product is unit elastic. FALSE

When a firm lowers its price its total revenue may either increase or decrease. TRUE

Whenever a firm raises its price its total revenue will increase.  FALSE

Whenever a firm increases its quantity sold its revenue will increase. FALSE

Explanation:

Price elasticity en the demand measures the porcentage of change in the quantity demandend when a price is changed.

When the porcentage of change in the quantity demanded is the same of the porcentage of change in the price we talk of unit elastic. The revenues will keep being the same no matter the change in the price.

When a firm lower the price of a good it can increase the revenues if the product has an elastic demand, it means that the porcentage of change in the quantity demanded is bigger than the porcentage in the change of the price, and if the product has an inelastic demand, the revenues will decrease. Price demand is inelastic when the porcentage of change in the quantity demanded is smaller than the porcentage in the change of the price.

7 0
3 years ago
1) Compute cash flows from financing activities using the above company information.
Varvara68 [4.7K]

Answer:

  1. $4,000
  2. $1,000

Explanation:

1. Financing Cashflows relate to cash spent or received for the capital used in the company. These include Equity, Long term borrowings and dividends. Interest payments go to the Operating Cashflow and investments go to the Investing cashflow.

Financing Cashflow is;

= Inflow - Outflow

= +20,000 - 16,000

= +$4,000

2. Investing Cashflows related to cash spent or received from fixed assets as well as the securities of other companies. Cash collections does not fall here but rather under Operating cashflows along with depreciation.

Investing Cashflow is;

= Inflow - Outflow

= +6,000 - 5,000

= $1,000

8 0
3 years ago
The direct labor budget of Yuvwell Corporation for the upcoming fiscal year contains the following details concerning budgeted d
mylen [45]

Answer:

1) 1st quarter: 74,000

2nd Quarter:74650

3rd Quarter: 75625

4th Quarter: 73350

total overhead= $297,625

2)  manufcturing overhead for each quarter= fixed overhead/quarter+ labor hours / quarter × labor rate

Explanation:

1)

1st quarter= 8000×3.25 + 48,000= 74,000

  2nd Quarter= 8200×3.25 + 48,000=74650

  3rd Quarter= 8500×3.25 + 48,000= 75625

  4th Quarter= 7800×3.25 + 48,000= 73350

Total overhead = 74000+73350+75625+74650= 297,625

2)  manufcturing overhead for each quarter= fixed overhead/quarter+ labor hours / quarter × labor rate

3 0
3 years ago
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