All categories

3 years ago

Annuity repayment vs level principal repayment. can you compare these payments methods

Business

1 answer:

andriy [413]3 years ago

5 0

Answer: See explanation

Explanation:

Annuities are referred to as the loans that one would have to pay back over a period of time with a particular interest rate. It should be noted that annuities have consistent payments for the period that the loan will be paid back. An example of annuity is the car loan or the mortgage.

For a level principal loan, it should be noted that the principal payment will remain constant and won't change while there'll be a reduction in the interest rate over the period that the loan will be paid back. This means that there will be w reduction in the payments as the time progresses.

You might be interested in

Interstate Manufacturing is considering either replacing one of its old machines with a new machine or having the old machine ov

Aleksandr-060686 [28]

Answer and Explanation:

According to the scenario, computation of the given data are as follow:-

a) Net Present Value of Alternative 1

Given that

Net Initial cash investment = $150,000

Rate of return on investment = 10%

Salvage value of old machine = $15,000

Subsequent Cash Inflow is

= Expected Revenue Generated - Operating Cost After Overhaul

= $95,000 - $42,000

= $53,000

Year Subsequent Cash Inflow($) Present Value Table (10%) Present Value Of Cash Inflow($)

1 $53,000 0.909 $48,177

2 $53,000 0.826 $43,778

3 $53,000 0.751 $39,803

4 $53,000 0.683 $36,199

5 $68,000

(53,000+15,000) 0.621 $42,228

Total $210,185

Now

Net Present Value is

= Present Value of Cash Inflow - Present Value of Cash Outflow

= $210,185 - $150,000

= $60,185

b).Net Present Value of Alternative 2

Net initial cash investment = 300,000

Rate of return on investment = 10%

Cash Outflow is

= Expected Revenue Generated - Operating Cost

= $100,000 - $32,000

= $68,000

Year Cash Outflow($) Present Value Table (10%) Present Value ($)

1 $68,000 0.909 $61,812

2 $68,000 0.826 $56,168

3 $68,000 0.751 $51,068

4 $68,000 0.683 $46,444

5 $88,000 0.621 $54,648

($68,000 + $20,000)

Add: Salvage value of old machine now $29,000

Total value $299,140

Now

Net Present Value is

= Present Value of Cash Inflow - Present Value of Cash Outflow

= $299,140 - $300,000

= -$860

c).According to the analysis, we recommended alternative 1 for selecting by management as it contains positive net present value

7 0

4 years ago

When planning her company's annual sales meeting, Cynthia sets up a chat room months in advance and encourages people from each

Mashcka [7]

This is an example of <u>Collaboration</u>.

<u>Explanation:</u>

Collaboration can become a big strength for company owners or authorities, even public sectors are now more directed towards collaboration of both government and citizens to implement more strategies and shape a better development, like PPP (public-private-partnership) model. This not only benefit the firm's owner but also the employees and collaborator's same. Here Cynthia has collaborated with departmental team members by encouraging them to monitor well enough, so that firm have good outcome of meeting.

3 0

3 years ago

HD had reported a deferred tax asset of $130 million with no valuation allowance. At December 31, 2021, the account balances of

oksano4ka [1.4K]

Answer:

$101 million income tax expense

Explanation:

The income tax of HD can be computed by beginning with income tax payable less the increase in deferred tax asset in the year and finally by deducting the portion of current deferred tax asset that cannot be realized as shown below:

Current income tax payable $90 million

increase in deferred tax asset($170-$130) ($40 million)

unrealized deferred tax asset ($170*30%) $51 million

income tax expense in income statement $101 million

The HD income tax expense in income statement in 2021 is $101 million as computed due to the fact that prior payment in tax ha been paid in the year

7 0

3 years ago

Why is it an advantage to have a several job while you are building your career

krok68 [10]

To show that you have experience in the working field like if you're working in construction, masonry, carpentry, ect. But you want to be a brick welder and your employer will look at your job history and see the experience in the jobs that you worked for in the previous years and he would have a higher percentage of hiring you because of your experience.

6 0

4 years ago

Suppose you want to invest $10,000. You have two options: Option #1: Invest in municipal bonds with an expected return of 8.00%,

Katyanochek1 [597]

Answer: 20%

Explanation:

Municipal Bonds are generally not taxed so if you invest in the Municipal bond, the tax rate does not affect you.

The tax rate therefore that will make you indifferent between the 2 options is the one that will take the Corporate bond returns of Jefferson to 8% so that both bonds may give you the same return after tax.

Assuming that tax rate is 'x' then,

8 = 10 (1 - x)

8 = 10 - 10x

10x = 10 - 8

10x = 2

x = 20%

At a tax rate of 20%, the Corporate bonds give an 8% return.

8 0

3 years ago

Annuity repayment vs level principal repayment. can you compare these payments methods​

Annuity repayment vs level principal repayment. can you compare these payments methods