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maxonik [38]
2 years ago
5

You can buy property today for $2.2 million and sell it in 5 years for $3.2 million. (You earn no rental income on the property.

) a. If the interest rate is 10%, what is the present value of the sales price?
Business
1 answer:
Stolb23 [73]2 years ago
7 0

Answer:

PV of the sales price  $1,986,948.23

 

Explanation:

We will calcualte the present value of the sale price using the present value of a lump sum formula:

\frac{Maturity}{(1 + rate)^{time} } = PV  

Maturity 3,200,000

time                         5 years

rate         10% = 10/100 = 0.1

\frac{3200000}{(1 + 0.1)^{5} } = PV  

PV        $1,986,948.2338  

This indicates the 3,200,000 in five years are equivalent to 1,986,948.23 dollars Thus, this investment is not profitable as the property will be purchased at 2,200,000

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Answer:

a) Ponzi Products

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COGS                              $0                   $500             $500              $0

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Since no products are sold during the first and fourth quarter, their respective revenues, COGS and operating income is $0.

b) Ponzi Products

Schedule of Expected Cash Receipts

For quarters 1, 2, 3 and 4 of year 202x

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Sales revenue                $0                    $0                $550            $600

Cost of goods man.  ($1,000)                $0                   $0               $0

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c) This question is incomplete, it should say what is Ponzi's net working capital for each quarter?

NWC = current assets - current liabilities

NWC Q1 = $1,000 (Merchandise inventory account, no liabilities)

NWC Q2 = $500 (Merchandise inventory account, no liabilities)

NWC Q3 = $550 (Cash account, no liabilities)

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Answer:

d. All of the last 12 payments he received are taxable.

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In the case when the life expectancy is 180 months and collected 192 payments prior he died

So according to the question, all the 12 payments would be received are taxable

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