195. Padilla Pawnshop sells jewelries on either of the following arrangements: Cash Price: Discount of 10% of the marked price Installment: Down payment of 20% of the marked price and the balance payable in equal annual installments for the next 4 years. If you are buying a necklace with a marked price of P5,000, how much is the difference between buying in cash and buying in installment? Assume that money is worth 5%. A. P40.76 B. P41.90 C. P43.54 D. P45.95

195. Padilla Pawnshop sells jewelries on either of the following arrangements: Cash Price: Discount of 10% of the marked price Installment: Down payment of 20% of the marked price and the balance payable in equal annual installments for the next 4 years. If you are buying a necklace with a marked price of P5,000, how much is the difference between buying in cash and buying in installment? Assume that money is worth 5%. A. P40.76 B. P41.90 C. P43.54 D. P45.95

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter19: Lease And Intermediate-term Financing

Section: Chapter Questions

Problem 10P

See similar textbooks

Similar questions

Del Hawley, owner of Hawleys Hardware, is negotiating with First City Bank for a 1-year loan of 50,000. First City has offered Hawley the alternatives listed here. Calculate the effective annual interest rate for each alternative. Which alternative has the lowest effective annual interest rate? a. A 12% annual rate on a simple interest loan, with no compensating balance required and interest due at the end of the year b. A 9% annual rate on a simple interest loan, with a 20% compensating balance required and interest due at the end of the year c. An 8.75% annual rate on a discounted loan, with a 15% compensating balance d. Interest figured as 8% of the 50,000 amount, payable at the end of the year, but with the loan amount repayable in monthly installments during the year
A store offers two payment plans. Under the installment plan, you pay 25% down and 25% of the purchase price in each of the next 3 years. If you pay the entire bill immediately, you can get a discount of 12% on the purchase price. Assume the product sells for $100. a-1. Calculate the present value of the payments if you can borrow or lend funds at an interest rate of 7 percent.
A store offers two payment plans. Under the installment plan, you pay 25% down and 25% of the purchase price in each of the next 3 years. If you pay the entire bill immediately, you can take a 10% discount from the purchase price. Assume the product sells for $100. a-1. Calculate the present value of the payments if you can borrow or lend funds at an interest rate of 5 percent. (Do not round intermediate calculations. Round your answer to 2 decimal places.) a-2 Which is a better deal? b-1. Calculate the present value if the payments on the 4-year installment plan do not start for a full year. (Do not round intermediate calculations. Round your answer to 2 decimal places.) b-2. Which is a better deal?
What is the present value of $700 to be received in two equal installments ($350 each), two years and five years from today, when the annual discount rate is 10%? Suppose Capitol Federal Bancorp offers a certificate of deposit that pays $10,000 in five years for exchange for $8,000 today. What interest rate is Capitol Federal Bancorp offering? Suppose Bank One offers a certificate of deposit that pays $5,000 in four years for exchange for $4,000 today. What interest rate is Bank One offering? How many years will take $10,000 to grow to $20,000 if bank offered rate is 10%? How many years will take $25,000 to grow to $120,000 if bank offered rate is 18%? Suppose you save $4,000 per year at the end of each year for 3 years and earn 5% interest per year. How much will you have at the end of 3 years? Suppose you save $4,000 per year at the end of each year for 10 years and earn 8.5% interest per year. How much will you have at the end of 10 years? Suppose you save $1,000 per…
A store offers its salespeople a table with coefficients to be applied to the cash sale value of its products in case the customer needs to finance the purchase of the products. Considering that the store charges a compound interest rate of 6% per month on installment sales, calculate the value of these coefficients in the following situations: a) 12 monthly installments, the first being paid after thirty days. b ) 24 monthly installments , the first being paid upon purchase . c) 36 monthly installments, the first being paid after six months.
MTR bank has agreed to provide a lockbox system to Sexy Inc. for a fixed fee of P50, 000 per year and a rate of P.50 for each payment processed by the bank. On average, Sexy Inc. receives 50 payments per day, each averaging P20,000. With the lockbox system, the company’s collection float will decrease by two days. The annual interest rate on money market securities is 6%. If Sexy Inc. makes use of the lockbox system, what would be the net benefit to the company? Use 365 days in a year. A. P50,000 B. P59,125 C. P60,875 D. P120,000
A small businessman is about to acquire a machine whose price is $ 15,000 with VAT included. If the cash purchase obtains a 15% discount, if you purchase it on credit you must pay an initial installment equivalent to 25% and the balance in six installments, with a grace period of one month without interest payment and the rest with a 3.8 % monthly. It asks:to. Payment in cash,b. The installment to pay on creditc. The total amount paid on credit
ABC Co. has a credit purchase of P40,000 with terms 2/10 net 30 with its supplier. Based on past experience, ABC Co. can manage to pay on the 40t day without penalty. The management of ABC Co. is pondering whether to avail the discount or not. ABC Co. has the following options of raising cash in case it wants to avail the discount:A. Convert its short term investments which is currently earning 14% per year. Transaction cost is estimated at 2%.B. Obtain a P40,000 discounted loan from PI which offers a discounted loan for 20 days at a cost of P320.IF the management makes the right decision, how much is the least possible cost(expressed in % to be incurred related to the trade credit?
If you purchase $27,000 in U.S. Treasury Bills with a discount rate of 4.2% for a period of 26 weeks, what is the effective interest rate? Round to the nearest hundredth percent. Step 1 The effective interest rate on a U.S. Treasury Bill, or T-Bill, is the actual interest rate on a loan to the government and takes into account the fact that the purchaser does not pay the full amount of the T-Bill. It is calculated using the interest, purchase price, and time. The amount of interest on a T-Bill is calculated as follows where the discount rate is given as a decimal and the time will be a fraction whose numerator is the given amount of time in weeks and denominator is 52 weeks. interest = face value ✕ discount rate ✕ time The rate was given to be 4.2%. As a decimal, we have 4.2% = . Calculate the interest (in $) for a $27,000 T-Bill with a discount of 4.2% for 26 weeks. interest = face value ✕ discount rate ✕ time in weeks 52 weeks = $27,000 ✕ ✕ 26…
A tresury bill with a face value of 100,000 dollars and 120 days until maturity is selling for 98,500 dollars. What is the Tbill bank discount yield. a. 5.4 percent a year b. 4.5 percent a year c. 45 percent a year
Lancaster Lumber buys $8 million of materials (net of discounts) on terms of 3/5, net 55, and it currently pays on the 5th day and takes discounts. Lancaster plans to expand, which will require additional financing. If Lancaster decides to forgo discounts, how much additional credit could it obtain, and what would be the nominal and effective cost of that credit? If the company could get the funds from a bank at a rate of 9%, interest paid monthly, based on a 365-day year, what would be the effective cost of the bank loan? Should Lancaster use bank debt or additional trade credit? Explain
Assuming you have seen a car displayed in a mall with installment price of P500,000 with no interest. It is payable in installments of P10,000 at the end of each month. How much is the cash price of the car if the prevailing market rate of interest is 10% per year?