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# Annuity

### You are considering the purchase of an office complex that will generate a gross of \$1000000 per year.

You are considering the purchase of an office complex that will generate a gross of \$1000000 per year. Because of long term leases, rental income is not expected to change over the next 20 years. Next year expenses will be \$200000. Their after, however expenses are expected to grow with inflation at 4% per year. Investors usua

### Annual Cash Flow Discount Rate Estimated Values

See the attached file. 1.) If Company A is acquiring Company B, how do I complete the following table? Table 1 Net Annual Cash Flow Discount Rate Estimated Value Company A \$42,274 0.09 Company B \$13,658 0.12 "Before A+B" Benefits -------------------------- ---------------------- --------------------- Less Curren

### Compound Interest

Here are the exercises: Can you also briefly explain why with 2-3 sentences, Thank you I am trying to better understand it. 1. (Compound interest) To what amount will the following investments accumulate? Why you think this way? a. \$5,000 invested for 10 years at 10 percent compounded annually b. \$8,000 invested for 7 years

### Compute the payback period. Is this a good measure of profitability? 2. Compute the NPV. Should Simon accept the proposal? Why or why not? 3. Compute the IRR. How does this compare with the required rate of return? Should Simon accept the proposal? 4. Using the accounting rate of return model, compute the rate of return on the initial investment.

Bob's Big Burgers is considering a proposal to invest in a speaker system that would allow its employees to service drive-through customers. The cost of the equipment (including installation of special windows and driveway modifications) is \$30,000. Jenna Simon, manager of Bob's, expects the drive-through operation to increase a

### The present value of a stream of equal cash flows occurring at regular intervals of time can be computed using a financial calculator. In this case, the amount of each cash

1.The present value of a stream of equal cash flows occurring at regular intervals of time can be computed using a financial calculator. In this case, the amount of each cash flow is input as the: a. present value. b. payment. c. future value. d. number of time periods. e. interest rate per period. 2. Which one

### T-F questions about taxation of corporations and partnerships

Please answer the attached questions with True or False. 1. Unreasonable compensation can be reclassified as a nondeductible dividend payment to the shareholder. 2. The corporation cannot deduct as a business expense interest payments to creditors who are also shareholders. 3. The IRS determines that compensation i

### Annuity Value for Required Rate of Return

If you have a required rate of return of 12%, what would you be willing to pay for an annuity that will pay you \$200/month for the next 5 years? I need to see the calculation steps.

### Financial Management

1)Rocking Horse Corporation reported net income for 2004 of \$100,000, sales of \$300,000, expenses (excluding depreciation) of \$150,000, and depreciation expense of \$50,000. The company's accounts receivable balance increased by \$25,000 during the year and its accounts payable balance remained the same. The company's change in

### P4-51

P4-51 Interest rate for an annuity Anna Waldheim was seriously injured in an industrial accident. She sued the responsible parties and was awarded a judgment of \$2,000,000. Today, she and her attorney are attending a settlement conference with the defendants. The defendants have made an initial offer of \$156,000 per year for

### P4-37 Annuities and Compounding

P4-37 Annuities and compounding Janet Boyle intends to deposit \$300 per year in a credit union for the next 10 years, and the credit union pays an annual interest rate of 8%. a. Determine the future value that Janet will have at the end of 10 years, given that end-of-period deposits are made and no interest is withdrawn, if (1)

### Forbes Company, Rice Corporation, Dolan Co.

Just wanted verification to see if I did anything wrong for the following questions. file attached. 1. Forbes Company paid \$7,200 on June 1, 2004 for a two-year insurance policy and recorded the entire amount as Insurance Expense. The December 31, 2004 adjusting entry is a. debit Insurance Expense and credit Prepaid In

### Future value

You own an oil well that will pay you \$25,000 per year for 8 years, with the first payment being made today. If you think a fair return on the well is 7% how much should you ask for if you decide to sell it.

### How Large Should the Deposits Be for the Car Purchase?

You want to purchase a car for \$40,000 when you graduate in two years. At that time you will take out a 5-year bank loan at 12% compounded monthly. Based on your estimated earnings, you think you will be able to afford loan payments of \$750 per month. You plan to save up the difference between the cost of the car and the amount

### 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

### Annuity Problem - The Wintergreens

The Wintergreens are planning ahead for their son's education. He's eight now and will start college in 10 years. How much will they have to set aside each year to have \$65000 when he starts if the interest rate is 7%?

### 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

### Multiple Choice Question

Multiple choice questions for NPV, PV and cash flows.

### 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.

### Trust Funds

Lorette J of Alvin research Corporation was thrilled with the response she had received from drug companies for her latest discovery, a unique electronic stimulator that reduces the pain from arthritis. The process had yet to pass rigorous Federal Drug Administration testing and was still in the early stages of development, but

### 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

### Andahl Corporation Stock

Andahl Corporation stock, of which you own 500 shares, will pay a \$2-per-share dividend one year from today. Two years from now Andahl will close its doors; stockholders will receive liquidating dividends of \$17.5375 per share. The required rate of return on Andahl stock is 15 percent. a. What is the current price of Andahl s

### 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

### Finance Problems - Present Value (Annuity) & Cash Budget

(Present value of an annuity) What is the present value of the following annuities? \$2,500 a year for 10 years discounted back to the present at 7 percent \$70 a year for 3 years discounted back to the present at 3 percent \$280 a year for 7 years discounted back to the present at 6 percent \$500 a year for 10 years di

### Present value of an Annuity

There are three factors that affect the present value of an annuity. 1) discount rate, 2) the number of discount periods, and 3) the amount of the periodic receipts or payments. I understand #1, but am having a problem with 2 and 3.

### 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