Explore BrainMass


Time value of money

The Stein family wants to buy a small vacation house in a year and a half. They expect it to cost $75000 at that time. They have the following sources of money. 1. They have $10000 currently in a bank account that pays 6% compounded monthly. 2. Uncle Murray has promised to give them $1000 a month for 18months starting today.

Value of cash flows

Question 3 (TVM) (15 marks) Consider the following stream of cash flows: where the payments of X start one year from today and last for 10 years; and the payments of Y start in 11 years from now and last forever. The interest rate is 4%. (a) If X = $100 and Y = $200, what is the present value of this stream? (4 marks) (b

How much larger or smaller is the bank loan payment than the lease payment?

Sutton Corporation, which has a zero tax rate due to tax loss carry-forwards, is considering a 5-year, $6,000,000 bank loan to finance service equipment. The loan has an interest rate of 10% and would be amortized over 5 years, with 5 end-of-year payments. Sutton can also lease the equipment for 5 end-of-year payments of $1,79

Completing Form 1040 using Schedule A

John R. Lane (SSN 123-44-6666) lives at 1010 Ipsen Street, Yorba Linda, California 90102. John, a single taxpayer, age 66, provided 100% of his cousin's support. The cousin lives in Arizona. He wants to take advantage of the presidential election campaign check-off. John is an accountant. Other relevant information includes S

Present value of 3 proposals

Mr. Boone wife was killed in a car accident late one night. Mr. Boone is looking to sue the Frozen Food Company because the driver of the Frozen Food Company's truck was drunk and caused the accident that killed Mrs. Boone. After much negotiating with the law firm that represented the Frozen Food Company. The attorney for

Annuity and dividends for common stocks.

1) Morgan Jennings, a geography professor, invests $50,000 in a parcel of land that is expected to increase in value by 12 percent per year for the next five years. He will take the proceeds and provide himself with a 10-year annuity. Assuming a 12 percent interest rate, how much will this annuity be? 2) Folic Acid, Inc.

How many years to break even?

The company is considering an investment that costs $430,000 today and will provide $72,000 each year in net cash inflow, but the company is not sure how long the investment will last. The company has a discount rate of 10%. Compute the number of years of useful life required for this investment to break even.

Finance: Multiple Choice questions on Time Value of Money

Identify the letter of the choice that best completes the statement or answers the question. ____ 1. How much must be invested today to have $1,000 in two years if the interest rate is 5%? a. $909.09 b. $900.00 c. $907.00 d. $950.00 ____ 2. Find the present value of $100 to be received at the end of two years if th

Question about Bond Issue Price and Amortization Table

Bond issue price and premium amortization. On January 1, 2007, Lowry Co. issued ten-year bonds with a face value of $1,000,000 and a stated interest rate of 10%, payable semiannually on June 30 and December 31. The bonds were sold to yield 12%. Table values are: Present value of 1 for 10 periods at 10% .386 Present value

Present value and interest rate questions

1. Would you rather receive $1,000 a year for 10 years or $800 a year for 15 years if: A) your interest rate is 5%? B) Same question, but your interest rate is 20%? 2. What is the present value of the following three year cash-flow stream if your interest rate is 6%.... Year 1 $200, Year 2 is $400 then Year 3 of $300

Accounting Multiple Choice

1.) Cannon Company is considering a capital project that will return $100,000 each year for five years. At the company's hurdle rate of 10%, the present value of the annuity is $379,100. If the return on investment in the first year is $37,910, what is the return of investment that year? (a) $137,910 (b) $100,000 (c) $62,09

Note Payable

On December 30, 2004, Cey, Inc. purchased a machine from Frank Corp. in exchange for a noninterest-bearing note requiring eight payments of $40,000. The first payment was made on December 30, 2004, and the others are due annually on December 30. At date of issuance, the prevailing rate of interest for this type of note was 11%.

Future value factors and annual deposits

On January 15, 2004, Grant Corp. adopted a plan to accumulate funds for environmental improvements beginning July 1, 2008, at an estimated cost of $2,500,000. Grant plans to make four equal annual deposits in a fund that will earn interest at 10% compounded annually. The first deposit was made on July 1, 2004. Future value facto

Retirement annuity problem

Ms. Amidala Inflamada is celebrating today her birthday and 15th anniversary as the Executive Secretary for Mr. Num Bei Wan, President of Last Chance, Inc. During the day she was talking to her closest friends how turbulent where the first days she came in to work after her graduation from the University when she was only 22 ye

Growth Rates, Future value of an annuity & Portfolio risk

1. Growth Rates: - XYZ Corporation's 2005 sales were $12 million. Its 2000 sales were $6 million, a. At what rate have sales been growing? b. If someone made the statement: "Sales doubled in 5 years. This represents a growth of 100 percent in 5 years, so, dividing 100 percent by 5, we find the growth rate to be 20 percent pe

Present Value (PV)

A single person who has a high level of earnings and paid social security taxes throughout her life expects to retire at age 65 and receive $10,000 per year until she dies. Assume the person lives to age 80 and use a discount rate (10%) to find the present value of the benefit received by person when he retires.

Personal Finance - Kim and Dan Bergholt are both government workers

Kim and Dan Bergholt are both government workers. They are considering purchasing a home in the Washington D.C. area for about $280,000. They estimate monthly expenses for utilities at $220, maintenance at $100, property taxes at $380, and home insurance payments at $50. Their only debt consists of car loans requiring a monthly

Annuity Plan

Mrs. S has 4 grandchildren, the oldest will enter college in 10 years. she wants to help pay for their college educations by giving each child $15,000 @ the beginning of each school year for each of the 4 years required to finish college. Toward that end, she just sold a small house she had owned for $40,000 & has invested the p

Time Value of Money

My company wishes to accumulate 1,300,000 by Dec.31, 2017, to retire bonds outstanding. We deposit 300,000 on Dec.31, 2007 which will earn interest at 10% compounded quarterly, to help in the retirement of this debt. In addition, I would like to know how much should be deposited at the end of each quarter for 10 yrs. to ensure t

Finance PV FV: Kyle corporation Repeat parts (a), (b), and (c) assuming that the corporate tax rate is 38 percent. Are the break-even levels of EBIT different from before? Why or why not?

Ch. 5 4) Calculating Annuity Present Value. An investment offers $4,500 per year for 15 years, with the first payment occurring 1 year from now. If the required return is 10 percent, what is the value of the investment? What would the value be if the payments occurred for 40 years? For 75 years? Forever? 20) Calculating L

Annual Benefit

A retirement plan guarantees to pay to you or your estate a fixed amount for 20 years. At the time of retirement you will have $73,425 to your credit in the plan. The plan anticipates earning 9% interest. Given the following information, how much will your annual benefits be? Present value of $1 PVIF = .18 Future va

Ordinary Annuity

An ordinary annuity pays 7.55% compounded monthly. A. Morty Zayshawn wants to make equal monthly deposits in his account for 30 years in order to then make equal withdrawals of $2,000 per month for the next 15 years, reducing the balance to zero. How much should be deposited each month for the first 30 years?

Bonds and Issue Price

On January 1, 2007 Kiner Co. issued five-year bonds with a face value of $400,000 and a stated interest rate of 12% payable semiannually on July 1 and January 1. The bonds were sold to yield 10%. Present value table factors are: Present value of 1 for 5 periods at 10% .62092 Present value of 1 for 5 periods at 12% .56743

Present and future value

In computing your answers to the cases below, you can round your answer to the nearest dollar. Present value tables are provided on the next page. Case A: On January 2, 2004, Notson Company loaned $50,000 to Pine Company. The terms of this loan agreement stipulate that Pine is to make 5 equal annual payments to Notson at 1

Compute the net present value of the annuity if the risk free investment is 5%

You have been totally disabled and you have been offered a settlement. In addition to your lifetime medical expenses you will receive a payment of 2,500,000 today or you can receive a lifetime annuity of 150,000 a year for the rest of your life. Using a life expectancy of 82 for men and 86 for women and your age of 32, compute