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Mumz [18]
3 years ago
13

Your annual salary is $100,000. You are offered two options for a severance package. Option 1 pays you 6 months' salary now. Opt

ion 2 pays you and your heirs $6,000 per year forever (first payment at the end of this year.) If you are required return is 11%, which option should you choose?
1. How much is the value for alternative 1?
2. How much is the value of alternative 2?
Business
1 answer:
kotegsom [21]3 years ago
7 0

Answer:

Option 1 is more convenient.

Explanation:

Giving the following information:

The annual salary is $100,000. You are offered two options for a severance package. Option 1 pays you 6 months' salary now. Option 2 pays you and your heirs $6,000 per year forever

The present value of option 1 is:

PV= 6*100,000= $600,000

To calculate the present value of option 2 we need to use the present value formula of a perpetual annuity:

PV= Cash flow/i

PV= 6,000/0.11= $54,545

There is no doubt that option 1 is better.

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Hudson, Inc. is a calendar-year corporation. Its financial statements for the years 2021 and 2020 contained errors as follows: 2
lubasha [3.4K]

Answer:

$3,000 understated

Explanation:

The computation of the working capital in case of no correcting entries made is shown below:

= Depreciation Expense for 2020 - depreciation expense for year 2021 - ending inventory for 2021

= $18,000 - $6,000 - $9,000

= $3,000 understated

While there is no additional errors occurred and no correcting entries passed so in this the $3,000 is understated by above calculation

6 0
3 years ago
McClary Tires plans to save $20,000, $25,000, $27,500, and $30,000 at the end of each year for Years 1 to 4, respectively. If it
fomenos

Answer:

Total= $107,130.79

Explanation:

Giving the following information:

McClary Tires plans to save $20,000, $25,000, $27,500, and $30,000 at the end of each year for Years 1 to 4, respectively.

The discount rate is 3.3%.

To calculate the future value, we need to use the following formula for each cash flow:

FV= PV*(1+i)^n

Cf1= 20,000*1.033^3= 22,046.06

Cf2= 25,000*1.033^2= 26,677.23

Cf3= 27,500*1.033= 28,407.5

Cf4= 30,000

Total= $107,130.79

4 0
3 years ago
Read 2 more answers
True or false created during the great depression, the federal deposit insurance program resulted in a large number of bank fail
Ainat [17]
False. This is not a true thing.
7 0
3 years ago
ABC Company projects the next period sales will be 12,000 units. ABC Company desires ending inventory equal to 20% of the next m
enyata [817]

i dont know the answer but i really need points☹️

4 0
3 years ago
The "pseudo dividend method" (PDM) is a valuation method involving zero explicitly forecasted dividends and an adjustment to wor
dsp73

This question is incomplete, below is the complete one gotten from google:

The "pseudo dividend method" (PDM) is a valuation method involving zero explicitly forecasted dividends and an adjustment to working capital to strip surplus cash. True of False?

Answer:

The "pseudo dividend method" (PDM) is a valuation method involving zero explicitly forecasted dividends and an adjustment to working capital to strip surplus cash - True

Explanation:

With regards to the pseudo dividend method" (PDM) is a valuation method The following happens:

  • There is a formally projection of all cash surpluses as paid out as dividends
  • Balance sheet will have zero for all surplus cash balances
  • Venture’s equity can be valued directly using dividends/issue line in CF Statement (or by equity VCF method)
  • There will be no excess cash in end

5 0
3 years ago
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