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serious [3.7K]
3 years ago
13

You are set to receive an annual payment of $12,100 per year for the next 17 years. Assume the interest rate is 7 percent. How m

uch more are the payments worth if they are received at the beginning of the year rather than the end of the year
Business
1 answer:
uranmaximum [27]3 years ago
4 0

Answer:

The difference in value is worth $8,269 more in money.

Explanation:

Case 1. Payments are made at the end of each year

So here, we will use the annuity formula for computing the present value of payments that we are receiving at the end of each year.

Here

Annual Cash flow is $12,100

Interest Rate "r" is 7%

And

Number of Payments "n" will be 17

Present Value = Cash flow * [1 - 1 / (1+r)^n] / r

By putting values, we have:

Present Value = $12,100 * [1 - 1 / (1 + 7%)^17] / 7%

Present Value = $12,100 * 9.763223

Present Value = $118,135

Now

Cash 2. Payments are arising at the start of each year

Just like the case above, we will use the annuity formula for computing the present value of payments that we are receiving at the start of each year. The first payment will be at worth the same because it is received in today's price.

So

Present Value = Cash flow     +       Cash flow * [1 - 1 / (1+r)^n] / r

So by putting values, that were used in case 1, we have:

Present Value = $12,100 + $12,100 * (1 - (1/1.07)^16) / 0.07

Present Value = $12,100 + $12,100 * 9.446649

Present Value = $126,404

Difference in Present Value = PV of Case 1      -    PV of Case 2

= $126,404 - $118,135 = $8,269

The difference in value is worth $8,269 more in money.

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arter Company sells merchandise on account for $4,000 to Hannah Company with credit terms of 2/10, n/30. Hannah Company returns
timama [110]

Answer:

The answers are:

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  • Dr $3,332 Cash
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  • Dr $600 returned merchandise (damaged)

Explanation:

The credit terms of 2/10, n/30 means that if Hannah Company pays within ten days, they will get a 2% discount, or they have thirty days to pay the full receipt.

Hannah's check should be for:

($4,000 - $600) x 0.98% = $3,400 x 0.98% = $3,332  

Arter Company should record the following entries:

Cr Accounts receivable $4,000

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6 0
3 years ago
Insurance protects you from associated risks, Match each scenario to the insurance
den301095 [7]

Matching each scenario to the insurance needed for protection.

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  • Someone broke into Maria's house and stole her flat screen TV and other values-  Homeowners insurance.

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<h3>What is insurance?</h3>

Insurance can be defined as a coverage that help to cover cost or expenses in case of unforeseen or unexpected circumstances such as:

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Therefore Tyrell's son has leukemia and will need cancer  medications- Health insurance.

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8 0
2 years ago
It is likely that airplane tickets will be increased by 5% each year for the next four years. The cost of the plane ticket to De
Luba_88 [7]

Answer:

The amount to save now is = $862.03 (to 2 decimal places)

Explanation:

In order to solve this, we will compute the end-of-year amounts using the 5% increase each year. This is done as follows:

Year 1 ending = $200

Year 2:

Year 2 beginning price = $200

Note that 5% increase = 5/100 = 0.05

increase in year 2 = 5% of 200 = 0.05 × 200 = 10

Year 2 new price = 200 + 10 = $210

Year 3:

beginning price = $210

increase in year 3 = 0.05 × 210 = $10.5

Year 3 new price = 210 + 10.5 = $220.5

Year 4

beginning price = $220.5

interest in year 4 = 0.05 × 220.5 = 11.025

new price in year 4 = 220.5 + 11.025 = $231.525

Next to calculate the amount needed to pay for one travel ticket per year for the next four years, we will add the prices of the tickets each year as follows:

Total amounts needed = 200 +210 + 220.50 + 231.53 = $862.03

5 0
3 years ago
Describe what would be some examples of fixed cost and variable cost on a farm?
EleoNora [17]
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AVprozaik [17]

The credit balance in cash short and over at the end of an accounting period is reported as an expense on the income statement.

Income is the consumption and savings opportunity that a business captures within a specific time frame, usually expressed in money. Income is difficult to define conceptually and definitions vary by region.

The definition of income is the amount of money received by an individual, group or business during a specified period. An example income is an annual salary of $70,000.

Income is money received by an individual or business in return for providing work, producing goods or services, or investing capital. While individuals usually earn their income through wages or salaries, businesses generate income from the sale of goods or services that exceed their production costs.

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