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antoniya [11.8K]
3 years ago
11

You have won the lottery. You will receive $5,500,000 today, and then receive 40 payments of $1,900,000. These payments will sta

rt one year from now and will be paid every six months. A representative from Greenleaf Investments has offered to purchase all the payments from you for $35 million. If the appropriate discount rate is an APR of 9 percent compounded daily, should you take the offer
Business
1 answer:
san4es73 [151]3 years ago
6 0

Answer:

no, you shouldn't take the offer because the present value of your prize is higher than $35 million.

Explanation:

we must first calculate the present value of the annuity in 6 months. The effective interest rate per year = (1 + 9%/365)³⁶⁵ - 1 = 1.094162145 - 1 = 0.094162145 = 9.4162145

the discount rate for every 6 months:

0.094162145 = (1 + r)² - 1

1.094162145 = (1 + r)²

√1.094162145 = √(1 + r)²

1.046022058 = 1 + r

r = 0.046022058 = 4.6%

now the present value of the annuity in 6 years = $1,900,000 x (annuity factor, 4.6%, 40 periods) = $1,900,000 x 18.14185 = $34,469,515

then we must find the present value = $34,469,515 / 1.046 = $32,953,647.23

the total value of your prize = $32,953,647.23 + $5,500,000 = $38,453,647.23

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3 0
3 years ago
Performance Bike Co. is a wholesaler of motorcycle supplies. An aging of the company's accounts receivable on December 31 and a
maw [93]

Answer:

$36,648

Explanation:

age                                      balance     % uncollectible           total

Not past due                   $890,000               3/4%                 $ 6,675

1-30 days past due           $97,900                   2%                   $ 1,958

31-60 days past due         $44,500                   6%                  $2,670

61-90 days past due         $32,000                 16%                  $ 5,120

91-180 days past due         $23,100                40%                 $ 9,240

<u>Over 180 days past due    $16,900                65%                $10,985  </u>

Total                                  $1,104,400                                    $36,648

journal entry should be:

December 31, 202x, bad debt expense

Dr Bad debt expense 36,648

    Cr Allowance for doubtful accounts 36,648

8 0
3 years ago
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If protective import-restricting tariffs are imposed by a country, in the majority of cases that nation's consumers end up consu
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Answer:

If protective import-restricting tariffs are imposed by a country, in the majority of cases that nation's consumers end up

paying a higher price for the good than they otherwise would.

Explanation:

Import-restricting tariffs increase the cost of goods and services imported from other countries.  Governments have various reasons for making such impositions.  Some claim that the tariffs are imposed to protect local industries or to comply with local content requirements.  However, these restrictions hamper free trade.  They also distort the competitiveness of nations.

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