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ozzi
3 years ago
7

Two brothers each open IRAs in 2009 and plan to invest $3,000 per year for the next 30 years. John makes his first deposit on Ja

nuary 1, 2009, and will make all future deposits on the first day of the year. Bill makes his first deposit on December 31, 2009, and will continue to make his annual deposits on the last day of each year. At the end of 30 years, the difference in the value of the IRAs (rounded to the nearest dollar), assuming an interest rate of 7% per year, will be
A) $19,837.
B) $12,456.
C) $6,300.
D) $210.
Business
1 answer:
Goryan [66]3 years ago
6 0

Answer:

Future value of John's investment

FV = A<u>(1+r)n+1 - (1+r) </u>

                   r

Fv = $3,000<u>((1 + 0.07)30+1 - (1 +0.07))</u>

                           0.07

FV = $3,000<u>((1.07)31 - (1.07)</u>

                            0.07

FV = $3,000 x 101.0730414

FV = $303,219

Future value of Bill's investment

FV = A<u>((1 + r)n - 1)</u>

                r

FV = $3,000 <u>((1 + 0.07)</u>30 - 1)

                          0.07

FV = $3,000<u>((1.07)30 - 1) </u>

                        0.07

FV = $3,000 x 94.46078632

FV = $283,382

The difference in the value of IRAs

= $303,219 - $283,382

= $19,837

The correct answer is A

Explanation:

In the first case, we need to apply future value of annuity due formula since deposits are made at the beginning of each year.

In the second case, we need to apply future value of an ordinary annuity formula since deposits are made at the end of each year.

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GrogVix [38]

Answer:

a) expected revenue = 20,000 tons x $600 = $12,000,000 per year

initial investment = $3,000,000 + $300,000 = $3,300,000

contribution margin per unit = $600 - $450 = $150

total contribution margin = $150 x 20,000 = $3,000,000

annual fixed costs = $850,000

depreciation expense per year = $750,000

tax rate = 38%

required return rate = 18%

after tax salvage value = $280,000 x (1 - 38%) = $173,600

NCF₀ = -$3,300,000

NCF₁ = [($3,000,000 - $850,000 - $750,000) x 0.62] + $750,000 = $1,618,000

NCF₂ = $1,618,000

NCF₃ = $1,618,000

NCF₄ = $1,618,000 + $300,000 + $173,600 = $2,091,600

NPV = $1,296,797.61

IRR = 36.36%

b) our best case scenario:

expected revenue = 20,000 tons x $660 = $13,200,000 per year

initial investment = $2,550,000 + $285,000 = $2,835,000

contribution margin per unit = $660 - $450 = $210

total contribution margin = $210 x 20,000 = $4,200,000

annual fixed costs = $850,000

depreciation expense per year = $637,500

tax rate = 38%

required return rate = 18%

after tax salvage value = $322,000 x (1 - 38%) = $199,640

NCF₀ = -$2,835,000

NCF₁ = [($4,200,000 - $850,000 - $637,500) x 0.62] + $637,500 = $2,319,250

NCF₂ = $2,319,250

NCF₃ = $2,319,250

NCF₄ = $2,319,250 + $285,000 + $199,640 = $2,803,890

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our worst case scenario:

expected revenue = 20,000 tons x $540 = $10,800,000 per year

initial investment = $3,450,000 + $315,000 = $3,765,000

contribution margin per unit = $540 - $450 = $90

total contribution margin = $90 x 20,000 = $1,800,000

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NCF₀ = -$3,765,000

NCF₁ = [($1,800,000 - $850,000 - $862,500) x 0.62] + $862,500 = $916,750

NCF₂ = $916,750

NCF₃ = $916,750

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If during 2009, the country of Sildavia recorded a GDP of $65 billion, interest payments of $15 billion, imports of $13 billion,
Maslowich

Answer:

36 billion

Explanation:

The GDP can be calculated using the income approach in which the output of a country is equal to the total income people receive in that country.

GDP= Compensation of employees + Net interest + Rental income + Corporate profits

From this formula, you can isolate the compensation of employees:

Compensation of employees= GDP-Net interest - Rental income - Corporate profits

Compensation of employees= $65-$15-$7-$7

Compensation of employees= $65-$29

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The wages during 2009 in Sildavida were: $36 billion.

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