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evablogger [386]
3 years ago
15

Spielberg Inc. signed a $170,000 noninterest-bearing note due in five years from a production company eager to do business. Comp

arable borrowings have carried an 11% interest rate. What is the value of this debt at its inception?
A. $210,900B. $190,000C. $112,755D. $101,582
Business
1 answer:
GaryK [48]3 years ago
7 0

Answer:

$100,890

Explanation:

To determine the value of the debt we must calculate the present value of the note:

present value = future value of the note / (1 + interest rate)⁵

present value = $170,000 / (1 + 11%)⁵ = $170,000 / 1.11⁵ = $170,000 / 1.685

present value = $100,890

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An external competitor to Construction (from another island) is offering to build the new homes for $1300 each. Here are facts a
cupoosta [38]

Answer:

a. The minimum transfer price (per home) that Construction would be willing to accept would be $1,270

b. The maximum transfer price (per home) Island Evaluations would be willing to accept would be $1,300

Explanation:

a. According to the given data If Construction accepts the proposal of Island Evaluations, then it has to foregone the profits which could have been earned if Construction accepted the proposal of local villagers to build an incline, a bridge and a campground.

Hence, minimum transfer price (per home) for Construction should be such that it covers the profit foregone as given above:

Now, profit foregone is calculated as per the table below:

Figures in $

Particulars Revenue Cost Profit

Incline        1400          600 800

Bridge         1500 950  550

Campground 2700 1200 1500

Total        5600 2750 2850

Therefore, the transfer price should be such which can generate a profit of $2,850 for Construction.

Therefore, total revenue which should be generated = Cost of building five new homes + Profit foregone

= 700*5 + 2850 = $6,350

Hence, minimum transfer price (per home) should be = 6350/5 = $1,270

b. The maximum transfer price (per home) that Island Evaluations will be willing to accept is $1,300 per home as quoted by the external competitor from another island.

4 0
2 years ago
Hernando lives in a county where everyone pays the same amount of taxes no matter their income. Which type of tax system is Her
Temka [501]

Answer: Proportional Tax System

Explanation:

7 0
2 years ago
Choose the correct box of the best buy available.
salantis [7]
B.one loaf of bread free when you buy one at regular price of 68 cents per loaf
7 0
3 years ago
Graham receives $640,000 at his retirement. he invests x in a twenty-year annuityimmediate with annual payments and the remainin
Sauron [17]
<span>For the amount invested in the 20 year annuity immediate,

the return will be;
 r/(1 - (1+r)^-n) = 0.05/(1- 1.05^-20)
= 0.0802425872
= 8.02425872% 

Now, return on perpetuity-immediate = 5% 

So, 5% + </span>8.02425872% = 13.02425872<span>

for equal returns from both investments,
X = 5/(13.02425872) x 640,000

= $245,695.365 

= $ 245,695.36 </span>
6 0
3 years ago
You are planning to save for retirement over the next 25 years. To do this, you will invest $700 per month in a stock account an
olga2289 [7]

Answer:

withdraw each month is $6,902.37

Explanation:

given data

time = 25 year

invest = $700 per month

stock amount = $300 per month

expected rate = 9% = \frac{0.09}{12}

bond account = 5%

return =  6%

to find out

withdraw each month from account for 20 year withdrawal period

solution

we will apply here future value formula that is

FV = P \frac{(1+r)^t -1}{r}      ...............1

here P is principal amount i.e $700 given and r is are and t is time

so

The value of the stock account at retirement will be

value of the stock account =  700 \frac{(1+\frac{0.09}{12})^{25*12} -1}{\frac{0.09}{12}}  

value of the stock account = $784,785.36

and

value of the bond account at retirement will be

value of the bond account =  300 \frac{(1+\frac{0.05}{12})^{25*12} -1}{\frac{0.05}{12}}  

value of the bond account = $178,652.91

and

so  value of the two accounts combined is here

= $178,652.91+$784,785.36    = $963,438.27

so

monthly withdrawal from combined account is

amount = \frac{Pv}{\frac{1- \frac{1}{(1+r)^t}}{r} }      ...............2

amount = \frac{963438.27}{\frac{1- \frac{1}{(1+\frac{0.06}{12})^{20*12}}}{\frac{0.06}{12}} }  

amount =  $6,902.37

3 0
3 years ago
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