Mastery Problem: Time Value of MoneyTime value of moneyDue to both interest earnings and the fact that money put to good use should generate additional funds above and beyond the original investment, money tomorrow will be worth less than money today.Simple interestRoss Co., a company that you regularly do business with, gives you a $11,000 note. The note is due in three years and pays simple interest of 10% annually. How much will Ross pay you at the end of that term? Note: Enter the interest rate as adecimal. (i.e. 15% would be entered as .15)Principal( PrincipalRateTimeTotal+($Xyears

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Financial Accounting: The Impact on Decision Makers

10th Edition

ISBN:9781305654174

Author:Gary A. Porter, Curtis L. Norton

Publisher:Gary A. Porter, Curtis L. Norton

Chapter9: Current Liabilities, Contingencies, And The Time Value Of Money

Section: Chapter Questions

Problem 9.21MCE

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Calculating interest earned and future value of savings account. If you put 6,000 in a savings account that pays interest at the rate of 3 percent, compounded annually, how much will you have in five years? (Hint: Use the future value formula.) How much interest will you earn during the five years? If you put 6,000 each year into a savings account that pays interest at the rate of 4 percent a year, how much would you have after five years?
Use the tables in Appendix B to answer the following questions. A. If you would like to accumulate $2,500 over the next 4 years when the interest rate is 15%, how much do you need to deposit in the account? B. If you place $6,200 in a savings account, how much will you have at the end of 7 years with a 12% interest rate? C. You invest $8,000 per year for 10 years at 12% interest, how much will you have at the end of 10 years? D. You win the lottery and can either receive $750,000 as a lump sum or $50,000 per year for 20 years. Assuming you can earn 8% interest, which do you recommend and why?
Cost of Bank Loan Mary Jones recently obtained an equipment loan from a local bank. The loan is for 15,000 with a nominal interest rate of 11%. However, this is an installment loan, so the bank also charges add-on interest. Mary must make monthly payments on the loan, and the loan is to be repaid in 1 year. What is the effective annual rate on the loan (assuming a 365-day year)?
You put $600 in the bank for 3 years at 15%. A. If Interest Is added at the end of the year, how much will you have in the bank after one year? Calculate the amount you will have in the bank at the end of year two and continue to calculate all the way to the end of the third year. B. Use the future value of $1 table In Appendix B and verify that your answer is correct.
Please indicate what you entered into your calculator to solve these problems. 1. You graduated with $28,000 in school loans. You will make annual payments of $4,000 at the beginning of each year for the next 10 years. What annual rate of interest are you being charged on your school loans? 2. You bought equipment for $23,000 and agreed to make monthly payments at the end of each quarter for 5 years. Assuming you are being charged 9% interest compounded QUARTERLY, how much will your QUARTERLY payments be? 3. You currently have $750,000 in your building fund. If you start depositing an additional $20,000 per year into this account at the beginning of each year, how much will be in the account after 6 years assuming 5.5% interest compounded annually? 4. You want to start saving for a new car and have decided to put S$90 per month at the beginning of each month into an account which earns 6% compounded monthly. You would like to be able to buy a car for $25,000. (a) How many deposits will…
Time value of money Due to both interest earnings and the fact that money put to good use should generate additional funds above and beyond the original investment, money tomorrow will be worth less than money today. Simple interest Ross Co., a company that you regularly do business with, gives you a $11,000 note. The note is due in three years and pays simple interest of 10% annually. How much will Ross pay you at the end of that term? Note: Enter the interest rate as a decimal. (i.e. 15% would be entered as .15) Principal + ( Principal Rate Time ) = Total X 11,000 V + ($ 11,000 0.15 X years ) = 14,300 X
3. Time Value of Money Assume that ten years from now, you will need $10,000 and that your bank compounds interest at a 4 percent annual rate. A. How much do you need to deposit today in order to have a balance of $10,000 in 10 years? Explain and show your work. B. Suppose instead that you want to make equal payments in years 1 through 9 to accumulate $10,000 in year 10, how large must each of the 9 payments be? Explain. C. If your (very reliable) uncle were to offer to make the payments found in part (B) for you or to give you $7,000 one year from now, which would you choose? Explain. (Even if you could not solve for the answer in part B, please explain what criterion you would use to make the choice.)4. Capital Asset Pricing Model 4. Capital Asset Pricing Model In parts (A), (B), and (C) below assume that the risk-free interest rate is 3 percent and the market risk premium is 7 percent. A. Dorothy Inc. is considering a project that will generate after-tax annual cash flows of…
PROBLEM (1-4) (A) If you want to have $250 in 5 years and you can earn an annual return of 7%, how much must you invest today? Be sure to use cell references and make sure that your answer appears as a positive value. (B) If you make a one-time deposit today of $800 you can earn 10% per year, how much would you have in your account after 15 years? Be sure to use cell references and remember that deposits from you are outflows. (C) If your investment of $1,254 declined to $435 in 6 years, what compounded annual rate of return would you have earned? Be sure to use cell references and to convert your answer to a percent rounded to two places after the decimal point. (D) If you can earn 5% per year, precisely how many years would it take for your investment of $450 to turn into $1,200? Be sure to use cell references and display your answer rounded to two places after the decimal point. TIME VALUE OF MONEY: LUMP SUMS PV FV r n (A) (B) (C) (D)
NOTE that significant marks will be lost if your answer does not include the NUMERICAL FORMULA. Question 1 ( Time Value of Money and WACC) (a) You need to pay off a car loan within the next two years. The payment will be $4,000 every month. Today you have made a single deposit into a return-guaranteed investment account that will allow you to cope with all the monthly payments. This account earns an effective annual interest rate of 12.68250301%. The first payment will be made in one month. (i) Calculate the corresponding monthly rate for the investment account. (ii) “You need to have at least $96,000 at your account today in order to make all the payments on the car loan in the next two years.” True or false? Briefly explain without doing any time value of money related (i.e. PVA or FVA) calculations. (iii) What is the amount of the single deposit made today? (iv) If your mother is going to make the first year’s repayments for you (as a birthday gift) and thus you don’t…
PLEASE don't use excel for this. Show the solution with formula needed. SIMPLE INTEREST 1. You owe P120,000.00 from a friend that promise to pay 6% simple interest. How much will you pay at the end of 9 months? How about at the end of 1 year and 6 months? COMPOUND INTEREST 1. If the sum of P12,000.00 is deposited in an account earning interest rate of 9% compounded quarterly, what will it become after 1 year? And what is the effective rate? 2. An investment of P3,000,000.00 earns interest of 9% compounded continuously. What is the effective rate of interest?
SUBJECT: ENGINEERING ECONOMICS (a) Identify the Given and the Unknown or what is being asked in the problem (b)Provide the formula to be used (c)Show the complete solution. The final answer is already provided. You plan to deposit P100 into a savings account at the end of each month for the next 5 years. a.)At 3% compounded monthly, how much will you have accumulated at the end of 5 years? b.)How much difference would it make if the payments were made at the beginning of the month rather than at the end? Answer: a.) F = P6,464.67, b.) F value difference = P196.63
Dont uplode any image in answer (Comprehensive problem) You would like to have $70,000 in 15 years. To accumulate this amount, you plan to deposit an equal sum in the bank each year that will earn 8 percent interest compounded annually. Your first payment will be made at the end of the year. a. How much must you deposit annually to accumulate this amount? b. If you decide to make a large lump-sum deposit today instead of the annual deposits, how large should the lump-sum deposit be? (Assume you can earn 8 percent on this deposit.) c. At the end of year 5, you will receive $15,000 and deposit it in the bank in an effort to reach your goal of $70,000 at the end of year 15. In addition to the lump-sum deposit, how much must you invest in 15 equal annual deposits to reach your goal? (Again, assume you can earn 8 percent on this deposit.)

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