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Trava [24]
2 years ago
6

Assuming a 12% annual interest rate, determine the present value of a five-period annual annuity of $3,500 under each of the fol

lowing situations:
a. The first payment is received at the end of the first year, and interest is compounded annually.
b. The first payment is received at the beginning of the first year, and interest is compounded annually.
c. The first payment is received at the end of the first year, and interest is compounded quarterly.
Business
1 answer:
Katena32 [7]2 years ago
7 0

Answer:

a. The first payment is received at the end of the first year, and interest is compounded annually.

present value = annual payment x PVIFA

annual payment = $3,500

PVIFA, 12%, 5 periods = 3.6048

present value = $12,616.80

b. The first payment is received at the beginning of the first year, and interest is compounded annually.

annual payment = $3,500

PVIF annuity due, 12%, 5 periods = 4.0373

present value = $14,130.55

c. The first payment is received at the end of the first year, and interest is compounded quarterly.

present value = annual payment x PVIFA

annual payment = $3,500

effective interest rate = 1.03⁴ - 1 = 12.55%

PVIFA, 12.55%, 5 periods = 3.5562

present value = $12,446.70

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Charra [1.4K]

Answer: Option 2

Explanation:

3 0
3 years ago
If an excise tax is imposed on restaurant meals, a. fewer meals will be produced and sold b. more meals will be produced and sol
solniwko [45]

Answer:

Correct option is (a)

Explanation:

Excise tax is an indirect tax which is not imposed on customers directly. Excise tax is imposed on producers or sellers for goods produced and they in turn transfer the burden of tax on customers in the form of higher prices. That is why, it is called indirect tax.

It is usually imposed on those goods such as liquor and tobacco whose consumption the Government needs to decrease. If excise tax is imposed on restaurant meals, then the restaurant will be able to produce and sell less at the same price it was charging earlier. If the restaurant wishes to sell more, then it will have to charge higher price.

6 0
3 years ago
a. If Canace Company, with a break-even point at $960,000 of sales, has actual sales of $1,200,000, what is the margin of safety
lutik1710 [3]

Answer:

Results are below.

Explanation:

Giving the following information:

Break-even point in sales= $960,000

Actual sales= $1,200,000

<u>To calculate the margin of safety in dollars and as a percentage, we need to use the following formulas:</u>

Margin of safety= (current sales level - break-even point)

Margin of safety= (1,200,000 - 960,000)

Margin of safety= $240,000

Margin of safety ratio= (current sales level - break-even

point)/current sales level

Margin of safety ratio= 240,000 / 1,200,000

Margin of safety ratio= 0.2 = 20%

8 0
2 years ago
Bend Company uses the allowance method to account for uncollectible receivables. At the beginning of the​ year, Allowance for Ba
Len [333]

Answer:

$17,700

Explanation:

The computation of the net realizable value of Accounts Receivable at​ year-end is shown below:

= Ending balance of Accounts Receivable - year-end balance in Allowance for Bad Debts

= $19,800 - $2,100

= $17,700

Simply we deducted the year-end balance in Allowance for Bad Debts from the ending balance of accounts receivable and the same is presented in the currents asset side of the balance sheet.

4 0
3 years ago
The spot price of silver is $25 per ounce. The storage costs are $0.24 per ounce per year payable quarterly in advance. Assuming
rewona [7]

Answer:

The future price of Silver is $26.14

Explanation:

First we compute Total storage costs(Tsc) in the future given by the equation:

T<em>sc</em> = (S<em>c</em>/4) * [  1 + exp(-rT<em>1</em>) + exp(-rT<em>2</em>) ]

where Sc is the storage cost today

where r is the rate

S<em>c</em> = $0.24

T<em>1</em> = 3/12

T<em>2</em> = 6/12

r = 5%=5/100

 = 0.05

Tsc = (0.24/4) [ 1 + exp(0.05*3/12) + exp(0.05*6/12) ]

Tsc = 0.06 [ 1 + exp(-0.05×0.25) + exp(-0.05×0.5) ]

Tsc = 0.178

The future price( Fv) is given by:

Fv = (Sp+ Tsc) *exp(rt)

where Sp is the spot price of silver

where r is the interest rate

where t is the delivery time ratio (9 months compared to 12 months)

Sp = $25

r = 5%

 = 5/100=0.05

t = 9/12

   =0.75

Fv = (25. 000+0. 178) * e xp(0. 05×0 .75 )

Fv = $26. 14

4 0
3 years ago
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