Calculate the amount of accounting and economic costs and draw conclusions.
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- Aaron is planning to buy an apartment. He earns a monthly income of RM40,000 and plans to put aside 25% of his salary. Aaron has set aside ready cash for the 20% down payment on his apartment and the remaining balance will borrow from the bank. The bank charges the nominal rate of 10% for a 20-year mortgage loan. What is the price of the most expensive apartment that Aaron can buy?Loni buys a machine for her business. The machine costs $280,000. Loni estimates that the machine can produce a $64,000 cash inflow per year for the next 9 years. Loni's cost of capital is 7 percent. What is the approximate present value of the cash flow benefits for Loni?Marlin and Dory decide to start Message in a Bottle marketing business. Marlin cashes in a $15,000 savings deposit that was paying 6% interest per year. Dory sells a $20,000 bond that was paying 10% interest per year. They also borrow $30,000 from RBC Bank at 15% per year. What are the yearly implicit costs of financing the Message in a Bottle business? Select one: A. $7,400 B. $34,500 C. $2,900 D. $37,900 E. $72,400
- Soo Ling wants to start a business that she believes can produce cash flows of RM5,600, RM48,200, and RM125,000 at the end of each of the next three years, respectively. At the end of three years, she thinks she can sell the business for RM250,000. At a discount rate of 16 percent, what is her business worth today? Select one: A. RM314,011.33 B. RM297,077.17 C. RM325,837.81 D. RM280,894.67You have just graduated and need money to buy a new car. Your rich Uncle Chan willlend you the money so long as you agree to him back within four years, and you offer topay him the rate of interest that he would otherwise get by putting his money in asavings account. Based on your earnings and living expenses, you think you will be ableto pay him RM5,000 in one year, and then RM8,000 each year for the next three years.If Uncle Chan would otherwise earn 6% per year on his savings, how much can youborrow from him?Marty decides to purchas a paddlewheel boat to start a riverboat casino business. The boat costs one million dollars. He acquires a 10 year loan that has an annual interst rate of 2.5%, compounded weekly. What are the weekly payments on this loan? After one year, due to a donation by a silent partner, Marty is able to pay off the remainder of the loan. How much will this be?
- Mr. Ahmet, who won a prize of 1 million USD by participating in a quiz show, will provide a significant return if he uses it in repo, time deposit and bonds. However, careful decisions need to be made as to which area to invest. If the money is deposited in the bank, the bank pays interest once a month and pays 16% interest. Mr. Ahmet wants to buy 2 houses, one worth 900000 USD and the other 500000 USD, in the future, by investing this money in the bank. Accordingly, after how long is it possible for Ahmet Bey to buy these two houses with the money and income he earned? If you were Mr. Ahmet, how would you advise him to use this money?Margaret is planning to invest up to $22,000 in certificates of deposit at City Bank and People's Bank. She wants to invest at least $2000 but no more than $14000 at City Bank. The interest is 6% at City Bank and 7% at People's Bank. This is simple interest for one year. How much should she invest in each bank to maximize her income? What is the maximum income? yA) Rick is thinking about quitting his current job, which pays a salary of $54,000 per year, to own and operate his own business. If he starts the business, he expects to spend $230,000 to purchase physical capital. This amount of money would come from two sources: $110,000 from a bank loan at an interest rate of 7% per year and $120,000 from Rick's savings, which are currently invested in stocks that are equally risky as his intended business and earning 11% per year. The physical capital is expected to have useful life of 10 years and a scrap value of $25,000. Rick expects to spend $130,000 per year on assistants and to pay himself a salary of $23,000 per year while operating his business. His business is expected to earn total revenues of $260,000. After learning that Rick might quit, his employer offers him a salary of $62,000 per year to convince him to stay at his current job. The expected annual accounting profit of Rick's intended business is $__________ B) Rick is thinking…
- Barry wants to re-model the store that he has for his business. His cousin Diego agrees to give him $100,000, but asks for 10 percent of the profits in return. Joseph's father William is reluctant to put his own money into the business, but finally agrees to lend $100,000 to him at an interest rate of 5 percent per year, with interest to be paid every month. The agreement is put in writing. What most accurately describes these arrangements?Joe's Taco Hut can purchase a delivery truck for $20,000, for which he will take out a loan from the bank. He estimates it will generate a net income (after taxes, maintenance, and operating costs) of $4,000 per year. His other option is to go to work for someone else earning net income of $3,000 per year. Assume that Joe can resell the truck for the entire purchase price of $20,000. What is the VMP for the delivery truck (Joe's MB if he buys it)? Please enter your answer as a numerical response and do not type out your answer as words (ie. $3000 not "Three thousand dollars"). Will Joe buy the delivery truck if the interest rate is 3%? Simply type either "Yes" or "No" into the answer box Will Joe buy the delivery truck if the interest rate is 7%? Simply type either "Yes" or "No" into the answer box What is the highest interest rate Joe would be willing to pay? Please enter your answer as a numerical response and do not type your answer as words (ie. 3% not Three percent").Mr Ramu is a chief operating office of the company and being paid a salary of RM15,625 per month. His percentage portion for Employees Provident Fund contribution is 17%. He intent to buy a car worth RM290,000 and would be making a bank loan of RM100,000 to finance building an extension for his house kitchen. He also plans to bring his wife (housewife) and four children (two studying in a local university and the rest in secondary school) for an overseas holiday trip with an estimate cost RM15,000. He also plans to have a servant and a driver where he would be paying them with an annual salary of RM15,000 and RM24,000 respectively. His company is willing to prepared to restructure his remuneration package to accommodate the above needs. REQUIRED: (a) Explain how Mr Ramu’s remuneration package can be restructure on a more tax efficient basis based on the above information only. ( b) Based on (a), which are item (s) in the proposed remuneration package is/are taxable or exempted. (c)…
