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Fantom [35]
3 years ago
11

Your uncle is about to retire, and he wants to buy an annuity that will provide him with $75,000 of income a year for 20 years,

with the first payment coming immediately. The going rate on such annuities is 5.25%. How much would it cost him to buy the annuity today
Business
1 answer:
Nataly_w [17]3 years ago
4 0

Answer:

The annuity will cost him $963,212.95.-

Explanation:

Giving the following information:

Cash flow= $75,000

Interest rate= 0.0525

n= 20

First, we need to calculate the final value. We will use the following formula:

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

A= annual cash flow

FV= {75,000*[(1.0525^20) - 1]/0.0525} + {[75,000*(1.0525^20)] - 75,000}

FV= 2,546,491.88 + 133,690.82= $2,680,182.70

Now, the present value:

PV= FV/(1+i)^n

PV= 2,680,182.70/(1.0525^20)

PV= $963,212.95

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Day sales in inventory = Average inventory × 365 / Cost of goods sold

= 11600 × 365 / 71000 = 59.63 days

Average collection period = Average receivable × 365 / Credit sales

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Therefore, operating cycle will be:

= Day sales in inventory + Average collection period

= 59.63 days + 25.07 days

= 84.70 days

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= 84.70 - 43.70

= 41 days

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Lupo Corporation uses a job-order costing system with a single plantwide predetermined overhead rate based on machine-hours. The
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The amount of overhead applied to Job T687 is closest to: $280.

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Performance Obligation Fulfilled Over Time Philbrick Company signed a three-year contract to develop custom sales training mater
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Answer:

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Performance Obligation Fulfilled Over Time

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Year    Number of     Development     Sales            Gross

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2019          150            $ 55,000           $165,000      $110,000

2020       250               70,000             275,000      205,000

2021         100               20,000               110,000        90,000

Total       500          $145,000          $550,000   $405,000

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Expected Development and Training Costs:

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2020       250                    70,000

2021         100                    20,000

Total       500               $145,000

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