Answer:
A) A high interest rate & long time period
Explanation:
A high interest rate means that your principal amount is earning a higher return when deposited in a savings account. The interest amount when compounded frequently like every month, it also earns interest on it as well as the original amount invested. This effect is called compounding. On the other hand, a long time period of investment means that you have a longer time horizon over which your principal earns interest. For example if you start saving when you are 18 years old and wants to retire at 68 years old, you will have 50 years worth of interest earned which is longer investment horizon than when you start saving at 40 years of age.
Answer:
0.57 and 9.24 times
Explanation:
The computation is shown below:
a. Debt to equity ratio
= Total Liabilities ÷ Share holders' equity
= $2,400,000 ÷ $4,200,000
= 0.57
And, the times interest earned ratio is
= EBIT ÷ interest expense
where,
EBIT is
= Net income + taxes + interest
= $496,500 + $203,500 + $85,000
= $785,000
And, the interest expense is $85,000
So, times interest earned ratio is
= $785,000 ÷ $85,000
= 9.24 times
We simply applied the above formulas
Plus the year is 2019 not 2016
Answer:
The value of Liability is $15,993,281
Explanation:
Red Sun Rising Corp. is making annuity Payment of $1,100,000 for a period of 20 years. The value of this liability can be calculated by taking net present value of all future cashflows.
Present value of Annuity = P [ 1 - ( ( 1 + r )^-n ) / r ]
Present value of Annuity = $1,100,000 [ 1 - ( ( 1 + 3.25% )^-20 ) / 3.25% ]
Present value of Annuity = $1,100,000 [ 1 - ( ( 1 + 0.0325 )^-20 ) / 0.0325 ]
Present value of Annuity = $1,100,000 [ 1 - ( ( 1.0325 )^-20 ) / 0.0325 ]
Present value of Annuity = $15,993,280.76