Financial Accounting
3rd Edition
ISBN: 9780133791129
Author: Jane L. Reimers
Publisher: Pearson Higher Ed
expand_more
expand_more
format_list_bulleted
Videos
Textbook Question
Chapter 7A, Problem 2SEB
Present value. (LO 8). Able Company has offered to sell Cane Company some used office equipment. Able wants Cane to pay $100 per quarter (three-month period) for the next three years, with the payment due at the end of each quarter. Suppose the appropriate discount rate is 4. What is the actual sale price of the office equipment?
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
Your company is planning to purchase a new loader for $20,937. If
the company keeps the old loader, it will have $1,959 additional
maintenance cost for the first year and increases $308 each year till
the eighth year. Given the company's minimum attractive rate of
return (MARR) is 6%, what is the present cost of keeping the old
loader?
6%
1
2
3
4
5
879
6
9
Single Payment
Compound Present
Amount
Worth
Factor
Factor
Find F
Find P
Given F
Given P
F/P
P/F
1.060
1.124
1.191
1.262
1.338
1.419
1.504
1.594
1689
.9434
.8900
.8396
.7921
.7473
.7050
.6651
.6274
5919
Sinking
Fund
Factor
Find A
Given F
A/F
1.0000
.4854
3141
.2286
.1774
.1434
.1191
1010
0870
Compound Interest Factors
Uniform Payment Series
Capital
Recovery
Factor
Find A
Given P
A/P
1.0600
.5454
.3741
.2886
2374
2034
.1791
1610
1470
Compound
Amount
Factor
Find F
Given A
F/A
1.000
2.060
3.184
4.375
5.637
6.975
8.394
9.897
11 491
Present
Worth
Factor
Find P
Given A
P/A
0.943
1.833
2.673
3.465
4.212
4.917
5.582
6.210
6.802
Arithmetic…
Consider the rental rate of capital for an appliance rental company such as Rent-A-Center. Suppose Rent-A-Center buys televisions at the market price
(P) of $3,500 each and rents them out to customers. The company faces an interest rate (r) of 15% per year, and televisions depreciate at 15% per
year.
Fill in the following table with the interest cost per year and the loss due to wear and tear for each television per year.
Borrowing cost per year
Depreciation cost
G
Cost
(Dollars per television)
Assume that firms renting televisions earn zero profit. Using the information in the previous table, the rental rate of capital, in this case, is
per year per television.
s
to
Suppose the depreciation rate decreases due to improvements in the materials used to make televisions. This should cause the equilibrium rental rate
Show Transcribed Text
The last question option is either
"Increase" or "Decrease".
A company is considering the end of the year rental of a copying machine that costs P 1,000 the first year, and increasing by P 200 every year there after up to the fifth year. What is the equivalent amount to be paid at the end of the first year of all the rentals? Use i = 10%.
Choices:a. P 2,660b. P 5,163 c. P 5,679d. P 2,418
Show solution. Do not use excel. Ans C
Chapter 7A Solutions
Financial Accounting
Ch. 7A - Prob. 1YTCh. 7A - Suppose Action Company issues a 1,000, 10-year,...Ch. 7A - Suppose HPS Company issues a 1,000 face value,...Ch. 7A - Present value. (LO 8). Suppose you want to have...Ch. 7A - Present value. (LO 8). Able Company has offered to...Ch. 7A - Calculate payments using time value of money...Ch. 7A - Calculate payments using time value of money...Ch. 7A - Prob. 5PACh. 7A - Prob. 6PB
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Similar questions
- A firm can lease a truck for 5 years at a cost of $39,000 annually. It can instead buy a truck at a cost of $89,000, with annual maintenance expenses of $19,000. The truck will be sold at the end of 5 years for $29,000. a. What is the equivalent annual cost of buying and maintaining the truck if the discount rate is 12%? Note: Do not round intermediate calculations. Round your answer to 2 decimal places. Equivalent annual cost $ 20,317.57 b. Which is the better option? O Buy Leasearrow_forwardA firm can lease a truck for 4 years at a cost of $38,000 annually. It can instead buy a truck at a cost of $88,000, with annual maintenance expenses of $18,000. The truck will be sold at the end of 4 years for $28,000. a. What is the equivalent annual cost of buying and maintaining the truck if the discount rate is 16%? Note: Do not round intermediate calculations. Round your answer to 2 decimal places. Equivalent annual cost I b. Which is the better option? Lease Buyarrow_forwardThe owner of the firm expects to make a profit of K100 for each of the two yearsand be able to sell the firm at the end of the second year at K800. The owner ofthe firm believes the appropriate discount rate for the firm is 15%. What is thevalue of the firm?arrow_forward
- A furniture store has a love seat on sale for $699.00, with the payment due one year from today. The store is willing to discoun the price at an annual rate of 5% if you pay today. What is the amount if you pay today? THE SUBJECT IS MONEY AND BANKING.arrow_forwardA firm can lease a truck for 5 years at a cost of $49,000 annually. It can instead buy a truck at a cost of $99,000, with annual maintenance expenses of $29,000. The truck will be sold at the end of 5 years for $39,000. a. What is the equivalent annual cost of buying and maintaining the truck if the discount rate is 12%? Note: Do not round intermediate calculations. Round your answer to 2 decimal places. Answer is complete but not entirely correct. Equivalent annual cost S 35,501.30x b. Which is the better option? Buy Leasearrow_forwardEcono - Cool air conditioners cost $390 to purchase, result in electricity bills of $168 per year, and last for 5 years. Luxury Air models cost $590, result in electricity bills of $136 per year, and last for 8 years. The discount rate is 23%. a. What is the equivalent annual cost of the Econo-Cool model? Note: Do not round intermediate calculations. Round your answer to 2 decimal places. b. What is the equivalent annual cost of the Luxury Air model? Note: Do not round intermediate calculations. Round your answer to 2 decimal places. c. Which model is more cost-effective? multiple choice 1 Econo-Cool Luxury Air d-1. Now you remember that the inflation rate is expected to be 10% per year for the foreseeable future. What are the equivalent annual cost of the Econo - Cool and Luxury Air model? Note: Do not round intermediate calculations. Round your answers to 2 decimal places. d-2, Which model is more cost- effective? multiple choice 2 Econo - Cool Luxury Airarrow_forward
- The furniture store offers you no-money-down on a new set of living room furniture. Further, you may pay for the furniture in three equal annual end-of-the-year payments of $750 each with the first payment to be made one year from today. If the discount rate is 5%, what is the present value of the furniture payments? O $2,333.39 $2,673.01 O $2,214.27 O $2,042.44arrow_forwardConsider a firm with a contract to sell an asset for $154,000 five years from now. The asset costs $90,000 to produce today. a. Given a relevant discount rate of 13 percent per year, calculate the profit the firm will make on this asset. (A loss should be indicated by a minus sign. Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) b. At what rate does the firm just break even? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) a. Firm's profit (loss) b. Break-even rate %arrow_forwardYour firm needs to purchase 1,200 traffic cones from a supplier. One supplier demands apayment of $1,000.00 today plus $10.59 per cone payable in one year. Another supplier willask for no payment today and $11.59 per cone, also payable in one year. If the discountrate is 8.200% per year compounded annually, how much does your firm save (in terms oftoday’s dollars) by taking the less expensive offer compared to the more expensive offer?arrow_forward
- 6. Homes-R-Us is offering free credit on a new $200,000 home. You pay $40,000 down and then $16,000 a year for the next 10 years. We-Build'em-Better does not offer free credit but will give you $40,000 off the list price. a. If the discount rate is 5% per year, which company is offering the better deal? b. If the discount rate is 8% per year, which company is offering the better deal? Compare your answers to (a) and (b). Why do you think you are getting those results? c.arrow_forwardRJR Logistics needs a new color printer. The cost of the printer is $2,025, plus $380 per year in maintenance costs (the first maintence cost would occur in 1 year). The color printer will last for five years. Alternatively, a local company offers to lease the printer to RJR and do the maintenance as well. If the discount rate is 5.7%, what is the most RJR would be willing to pay per year to lease the color printer (the first lease payment would be due in one year)? The most RJR would be willing to pay per year to lease the color printer is closest to: O A. $897 B. $857 C. $884 D. $777arrow_forwardA tech company still focuses on a relatively small geography, but deliveries have increased, so the company decides to purchase a new delivery vehicle. The cost, in dollars is $104,500. They take out a 5-year "note" to pay for the vehicle, with 4% interest due at the beginning of each year. Does this mean that the interest yearly is 0.04*(104500/5) or 0.04*104500?arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Principles of Accounting Volume 2AccountingISBN:9781947172609Author:OpenStaxPublisher:OpenStax College
Intermediate Financial Management (MindTap Course...FinanceISBN:9781337395083Author:Eugene F. Brigham, Phillip R. DavesPublisher:Cengage Learning
Principles of Accounting Volume 2
Accounting
ISBN:9781947172609
Author:OpenStax
Publisher:OpenStax College
Intermediate Financial Management (MindTap Course...
Finance
ISBN:9781337395083
Author:Eugene F. Brigham, Phillip R. Daves
Publisher:Cengage Learning
Debits and credits explained; Author: The Finance Storyteller;https://www.youtube.com/watch?v=n-lCd3TZA8M;License: Standard Youtube License