Corporate Finance (4th Edition) (Pearson Series in Finance) - Standalone book
4th Edition
ISBN: 9780134083278
Author: Jonathan Berk, Peter DeMarzo
Publisher: PEARSON
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Chapter 27, Problem 12P
Summary Introduction
To determine: The effective annual rate.
Introduction:
Commercial papers are the safest mode of investment. It is the unsecured short-term loan mainly used to finance the inventories and accounts receivables.
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Omega Chemicals Ltd. took a $440,000 two-year note receivable from a customer in connection with a major sale transaction on 1
May 20X7. The note required annual 30 April interest payments of 3%, and the principal was due on 30 April 20X9. Omega has a 31
December year-end.
(PV of $1, PVA of $1, and PVAD of $1.)
Assume now that the market interest rate is 6%. Calculate the present value of the note, and prepare a schedule that shows the
interest for each year of the note receivable. (Round time value factor to 5 decimal places and intermediate calculations and final
answers to the nearest whole dollar amount. Enter all answers in positive.)
esent val
Opening Net
Liability/
Receivable
Closing Net
Liability/
Receivable
Interest
Interest Paid/
Discount
Expense/Revenue
Received
Amortization
On January 1, 2021, Dreamlover Corporation purchased equipment from Daydream Company for P3,600,000.
Term of payments includes issuing a 5-year noninterest-bearing note payable equally every end of the year.
The effective interest rate is 15%.
The entity used 2 decimal places for the PVF.
Requirements:
How much is the initial cost of the equipment?
Teari Company purchased a machine on September 1, 2021. The purchase agreement required Teari to pay an initial fee payment of P700,000 plus four P300,000 payments due every four (4) months, the first payment due December 31, 2021. The market interest rate is 12%. The present and future value tables at 4% for four (4) periods were as follows: Present value of P 1, 0.85; Present value of an ordinary annuity of P1, 3.63; Future value of P 1, 1.17, Future value of an ordinary annuity of P1, 4.25. What is the fair value of the note on December 31, 2021.
Chapter 27 Solutions
Corporate Finance (4th Edition) (Pearson Series in Finance) - Standalone book
Ch. 27.1 - Prob. 1CCCh. 27.1 - What is the effect of seasonalities on short-term...Ch. 27.2 - Prob. 1CCCh. 27.2 - What is the difference between temporary and...Ch. 27.3 - Prob. 1CCCh. 27.3 - Describe common loan stipulations and fees.Ch. 27.4 - What is commercial paper?Ch. 27.4 - How is interest paid on commercial paper?Ch. 27.5 - Prob. 1CCCh. 27.5 - What is the difference between a floating lien and...
Ch. 27 - Prob. 1PCh. 27 - Sailboats Etc. is a retail company specializing in...Ch. 27 - What is the difference between permanent working...Ch. 27 - Quarterly working capital levels for your firm for...Ch. 27 - Prob. 5PCh. 27 - Prob. 6PCh. 27 - Prob. 7PCh. 27 - Prob. 8PCh. 27 - Which of the following one-year 1000 bank loans...Ch. 27 - The Needy Corporation borrowed 10,000 from Bank...Ch. 27 - Prob. 11PCh. 27 - Prob. 12PCh. 27 - Prob. 13PCh. 27 - The Signet Corporation has issued four-month...Ch. 27 - Prob. 15PCh. 27 - Prob. 16PCh. 27 - Prob. 17PCh. 27 - Prob. 18P
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