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Alla [95]
3 years ago
7

Consider this case: Mildred’s Brewing Corp. needs to take out a one-year bank loan of $500,000 and has been offered loan terms b

y two different banks. One bank has offered a simple interest loan of 11% that requires monthly payments. The loan principal will be paid back at the end of the year. Another bank has offered 8% add-on interest to be repaid in 12 equal monthly installments. Based on a 360-day year, what will be the monthly payment for each loan for November? (Hint: Remember that November has 30 days.) Value Simple interest monthly payment Value Add-on interest monthly payment
Business
1 answer:
11Alexandr11 [23.1K]3 years ago
3 0

Answer:

Mildred's Brewing Corp.

Monthly Payment for each loan for November:

a) Simple Interest = $55,000/12

= $4,583

b) Value Add-on interest  monthly payment

= $43,494.31 ($521,931.68/12)

Explanation:

a) Data:

Bank loan = $500,000

Terms by bank one:

Simple interest of 11% paid monthly

Loan principal to be repaid at the end of the year.

Terms by bank two:

Add-on (Compound) interest = 8%

Repayment of interest and loan principal in 12 equal monthly installments.

b) Total Simple Interest Calculation:

Monthly Simple interest = ($500,000 x 11% )

= $55,000

c) Add-on Interest Calculation:

Using an online calculator, the total add-on interest will be $21,932.68 at an effective interest rate of 0.667% compounded monthly or 8%/12.

Principal =                $500,000.00

Total interest               $21,931.68

Principal + Interest  $521,931.68

Monthly Repayment = $43,494.31 ($521,931.68/12)

d) The simple interest option will cost $55,000 in simple interest and the loan repayment at year-end of $500,000.  The Add-on interest with equal monthly repayment of interest and principal will be $43,494.31, which costs $21,931.68 in total compound interest.

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Answer:

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3 years ago
On December 31, 2018, the balance in Megan's Products Accounts Receivable was $680,000 and net credit sales amounted to $3,800,0
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Answer:

Bad Debt Expense ($40,000 - $3,200)  $36,800

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Explanation:

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Answer:

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2) The variable cost per unit is $9/unit.

3) Cost equation: TC(Q)=20,200+9Q

4) TC=$35,145

5) TC=$33,702

6) Difference=$1,443

The appropiate approach is using the cost function, because its differentiates the cost that are fixed and not dependant of the volume of production, and the variable cost, that are proportional to the quantity produced.

Explanation:

1) The total cost of production can be calculated as the product of the cost per unit ($23.43/unit) and the total ammount of units (1,400 units):

TC=c*Q=23.43*1,400=32,802

The total cost of production (TC) is $32,802.

2) The fixed cost (FC) are $20,202, so the variable cost are:

VC=TC-FC=32,802-20,202=12,600

This is the variable cost for 1,400 mailboxes, so the unit variable cost is:

vc=VC/Q=12,600/1,400=9

The variable cost per unit is $9/unit.

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TC(Q)=20,200+9Q

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6) The dollar difference between the two estimates is:

TC_4-TC_5=35,145-33,702=1,443

The appropiate approach is using the cost function, because its differentiates the cost that are fixed and not dependant of the volume of production, and the variable cost, that are proportional to the quantity produced.

The average cost per unit is not constant for every quantity and the error will increase if the quantity is much different from 1,300 units.

3 0
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Answer:

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3 years ago
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