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Annuity

Finance: FV, PV, amortization and annuity problems

How much will $1.00 deposited in a savings account earning a compound annual interest rate of 6 percent be worth at the end of the following number of years? a. 3 b. 5 c. 10 If you require a 9 percent return on your investments, which would be preferred. Why? a. $5,000 today b. $15,000 five years from today c.

Low Risk Portfolio for Sonia: how much money should she accumulate for her goal?

Sonia Gomez, a 45-year-old widow, wishes to accumulate 4250,000 over the next 15 years to supplement the retirement programs that are being funded by the federal government and her employer. She expects to earn an average annual return of about 8% by investing in a low-risk portfolio containing about 20% short -term securities,

Lockbox / Concentration Banking

Richmond Corporation was founded 20 years ago by its president, Daniel Richmond. The company originally began as a mail-order company but has grown rapidly in recent years, in large part due to its Web-site. Because of the wide geographical dispersion of the company's customers, it currently employs a lockbox system with collect

Finance Problem

1.James plans to fund his individual retirement account, beginning today, with 20 annual deposits of $2,000, which he will continue for the next 20 years. If he can earn an annual compound rate of 8 percent on his deposits, the amount in the account upon retirement will be 1. 1. $21,207. 2. 2. $91,524. 3. 3. $98,84

Concepts of FV, NPV, annuities, risk, bonds, US Treasuries

1. A new SUV costs $33,000. You must pay 6% sales tax. You will put 10% of this total as a down payment. For 60 months, you must borrow at an annual rate of 10%. What annual rate would have the same payments stream at 48 months? (Payments at 10% for 60 months = "X" % for 48 months). 2. A rare painting increases in val

Present Value Concept and Calculating Present and Future Values

1. In two to three paragraphs, explain why the concept of present value is so important for corporate finance and is often the very first topic taught in any finance class. 2. Calculate the future value of the following: a. $600 if invested for five years at a 3% interest rate b. $400 if invested for three years at a 5% i

Jennifer expects to start college in five years.

Jennifer expects to start college in five years. The school she wants to go to will cost $18,000 per year for the four years (assume payments at end of each year). Her parents started saving $3,000 per year five years ago and will continue to do so for five more years. How much more will her parents have to invest each year

Accounting for Leases

Hay Corporation enters into an agreement with Marly Rentals Co. on January 1, 2008 for the purpose of leasing a machine to be used in its manufacturing operations. The following data pertain to the agreement: (a) The term of the noncancelable lease is 3 years with no renewal option. Payments of $155,213 are due on December 31 o

Financial Statements of Bush Corporation

Bush Corporation signed a lease for equipment from EZ Leasing Company on January 1 20X2, for a period of ten years at $40,000 per year, including insurance of $3,000 and taxes of $2,000 per year. The equipment had a useful life of fifteen years. At the end of the lease, Bush will have the option of buying the equipment outright

Financial Accounting: Lowest Investment and Occupancy Expenses

1) Paul Parent is evaluating investment alternatives for saving for his infant daughters college education. He has estimated that he will need $225,000 upon her graduation from high school in 18 years. Paul has the following options: 1. Locking in an 8 percent investment with a lump sum payment today 2. Earning a 9 percent r

Important information about Issue price of bonds

1) Amstop Company issues $20,000,000 of 10-year, 9% bonds on March 1, 2007 at 97 plus accrued interest. The bonds are dated January 1, 2007, and pay interest on June 30 and December 31. What is the total cash received on the issue date? 2) On January 1, 2007, Bleeker Co. issued eight-year bonds with a face value of $1,000,000

Taxation II

1.Jane purchased an annuity contract that pays her $800 per month. The annuity cost her $60,000 and it has an expected return of $100,000. How much of each monthly annuity payment is includible in jane's gross income? 2. Sam owes Bob $8,000. Bob cancels (forgives) the debt. The cancellation is not a gift and Sam is bankrupt.

Finance questions

A company has a capital structure that consists of 50 percent debt and 50 percent equity. Which of the following statements is most correct? a. The cost of equity financing is greater than or equal to the cost of debt financing. b. The WACC exceeds the cost of equity financing. c. The WACC is calculated on a before-tax basis

Time Value of Money Explained

Explain whether the following statement is true or false: $100 a year for 10 years is an annuity, but $100 in year 1, $200 in year 2, and $400 in years 3 through 10 does not constitute an annuity. However, the second series contains an annuity.

How much more will your parents have to invest each year for the next five years to have the funds for her education? How much money will your parents have at the end of three years to help you with graduate school, which you will start then?

1 Your younger sister, Jennifer, will start college in five years. She has just informed your parents that she wants to go to Penn State U,. which will cost $18,000 per year for four years (cost assumed to come at teh end of each year). Anticipating Jennifer's ambitions, your parents started investing #3,000 per year five years

Basic Value Concepts

Please reply in "doc" format: 1. Mario's auto shop plans to buy a new garage in three years to have more space for repairing it's trucks. The garage cost $400,000. What lump sum amount should the company invest now to have the $400,000 available at the end of the 3 yr period? Assume that the company can invest money at: a. ei

Time Value Money

1. Future Values. You deposit $1,000 in your bank account. If the bank pays 4 percent simple interest, how much will you accumulate in your account after 10 years? What if the bank pays compound interest? How much of your earnings will be interest on interest? 2. Calculating Interest Rate. Find the annual interest rate. Pr

Question about Annuity Problem

I would like assistance in setting up these two problems so I can go ahead and solve them. There are no examples in my text. a) A potential client asks you how much he would need to invest today (lump sum) to assure a $35,000 annual supplemental 15-year annuity upon retirement in 20 years. The annuity payment would begin a

Lump sum vs. annuity for your Uncle's employer pension plan

Your favorite uncle, having saved and lived frugally throughout his career, has retired at the age of 60. His former employer's pension plan has offered him the alternative of 1) receiving $478 per month until his death, or 2) receiving a lump sum distribution of $76,120. Lump sum payment under 2) would occur on the decision d

Financial Analysis Questions

Practice test questions 1) What are the key advantages common to LLPs and LLC. 2) If a stock is paying $3.0 per year in dividends, and is expected to continue this indefinitely, with a required rate of return of 10% what is the value of the stock? 3)If you want to have $600,000 for retirement in 20 years and have only

Future Value and Required Annuity Payment

Question 1 Fine the future values of the following ordinary annuities: a. FV of $400 each 6 months for 5 years at a nominal rate of 12%, compounded semiannually? b. Fine of $200 each 3 months for 5 years at a nominal rate of 12%, compounded quarterly? c. The annuties described in parts a and b have the same amount of mone

Need help

17. The basis for classifying assets as current or noncurrent is the period of time normally required by the accounting entity to convert cash invested in a. inventory back into cash, or 12 months, whichever is shorter. b. receivables back into cash, or 12 months, whichever is longer. c. t

Time value of money

Your brother is 55 years old now and his current savings declined to $500000 and he does not feel this is sufficient ,so he works for another 10 years to retire at age 65.He expects to live for another 20 years after he retires he wants to have $100000 to live on each of the 20 years ,the first payment occuring at the time of re

Time Value of Money Solution set

Using the appropriate interest table, provide the solution to each of the following four questions by computing the unknowns. a) What is the amount of the payments that Tom Brokaw must make at the end of each of 8 years to accumulate a fund of $70,000 by the end of the eight year, if the fund earns 8% interest, compounded ann

Future value of an annuity: streams of payment

What is the accumulated sum of each of the following streams of payments? 1. $500 a year for 10 years compounded annually at 5 percent 2. $100 a year for 5 years compounded annually at 10 percent 3. $35 a year for 7 years compounded annually at 7 percent 4. $25 a year for 3 years compounded annually at 2 percent

Mortgage, Annuity and Return

1. A $20,000 mortgage is to be paid by 180 equal monthly payments, each including some principal along with interest on the outstanding principal, at an effective rate of 3 1/2 per half year. What are the monthly payments? 2. An investor wants to purchase an annuity which will yield an income of $2000 at the end of each year