To get to free cash flows from accounting earnings, what is the formula used?

Cindy is taking out a loan today. The cash amount that she will receive today is equal to the present value of the lump sum paym

Alexxandr [17]

Answer:

Option E, PURE DISCOUNT.

Explanation:

There are different types of loan, some are; principal only loan, interest only loan, amortized loan, compound loan, pure discount loan...

A pure discount loan is a loan in which the borrower receives money today and repays a single lump at some time in future. It is the simplest form of loan.

Practically, it means the borrower will not pay any interest over the years; instead the interest is earned when the loan is paid back at maturity.

For example, imagine you wanted to borrow $20,000 and pay back twelve months later. The interest and charges came to $2,000, you would receive $18,000 from the lender. But, you would still have to pay back the whole $20,000.

Therefore, since Cindy will be paying a lump sum equal to the cash amount she received today, it means that the lender already calculated the interest and other related charges and then discounted it from the face amount thereby making it equal at the point of repayment. The option that best suits the question is E, the type of loan PURE DISCOUNT.

6 0

3 years ago

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Pollution control equipment for a pulverized coal cyclone furnace is estimated to cost $190,000 two years from now and an additi

Troyanec [42]

Answer: $250,096

Explanation:

To find out the amount that should be invested today, one should find the present values of both figures and add them up:

Interest rate should be periodically adjusted so: 8% / 2 = 4% per semi annum

No of periods should be adjusted as well.

Amount to be invested today:

$= \frac{190,000}{(1 + 0.04)^{2 * 2 periods} } + \frac{120,000}{(1 + 0.04)^{4 * 2 periods} }\\\\= \frac{190,000}{(1 + 0.04)^{4} } + \frac{120,000}{(1 + 0.04)^{8} }\\\\= 250,095.62$

= $250,096

8 0

3 years ago

Louise McIntyre's monthly gross income is $2,000. Her employer withholds $400 in federal, state, and local income taxes and $160

GREYUIT [131]

Answer:

a) 27.2%

b) No

Explanation:

Given:

Monthly gross income = $2,000

Federal, state, and local income taxes = $400

Social Security taxes per month = $160

IRA per month = $80

Monthly credit payments for Visa, = $35

Monthly credit payments for MasterCard, = $30

Monthly credit payments for Discover cards = $20

Automobile loan payment = $285

Now,

Net income of Louise = Gross income - Total Taxes - IRA

= $2,000 - ( $400 + $160 ) - $80

= $1,360

Total debt payments = Credit card payments + Automobile loan payment

= ( $35 + $30 + $20 ) + $285

= $370

Therefore,

Debt payments-to-income ratio = $\frac{\textup{Debt payments}}{\textup{Net income
}}$

= $\frac{\textup{370}}{\textup{1,360}}$

= 0.272

or

= 0.272 × 100% = 27.2%

(b) An individual should not spend more than 20% of their net income as debt to be within the means.

Since, the debt payments-to-income ratio exceeds 20 percent of her net income.

Hence, Louise is not living within her means

6 0

4 years ago

Potter Corporation has gained considerable market share in recent years for its specialty, low-volume, complex line of product

Oksana_A [137]

Answer:

Potter Corporation should turn to activity-based costing.

Explanation:

Potter Corporation should change to activity-based costing. Since Its present system seems to be deforming product costs, resulting in prices of specialty products that are below average and prices of simple products that are too high. This may lead Potter to push products that produce low profit margins.

7 0

3 years ago

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Write down a list of potential satisfiers in financial services and then a list of dissatisfiers. what would be the benefits to

coldgirl [10]

Answer:

Explanation:

Satisfiers are positive factors which influence work behavior. They are often addressed as "motivation givers"

List of satisfiers includes

Recognition

Promotion

Growth

Self growth

Achievements

Dissatisfiers on the other hand, are the negative factors that influence work behavior. They are called "hygene factors". Basically, they do not provide satisfaction.

Examples of dissatisfiers include

Company policies which frustrate employees

Working in unfavourable conditions

Poor salary

Not placing value on the employees

Too many bureaucracy.

Eliminating dissatisfiers brings decorum to a financial institution. It makes the institution utopian, so to say

6 0

3 years ago