Blackstone Company purchased a new software system costing $35,000. To finance the purchase, Blackstone signed a contract agreeing to pay the cost over the next 8 years, with a payment due every six months; the first payment will be made six months from the date of purchase. Blackstone's usual interest rate is 10%. What is the amount of the payment required (rounded to the nearest dollar)? 's usual 096, What is the amount of the Select one: O a. 16,030 O b. 6,560 O c. 3,229 d. 2,575 e. None of the above
Q: An industrial firm can purchase a certain machine for $40.000. A down payment of $-1.000 is…
A: Annual equivalence method: It is a method which helps in evaluation of different projects in order…
Q: A Cookie Company has negotiated to introduce a new cookie for 6 years. The cookie would be purchased…
A: initial cashflow: cost of the equipment = $300 000 working capital = $400 000. total initial…
Q: Galvanized Products is considering purchasing a new computer system for its enterprise data…
A: Net Present Value(NPV) is excess of present value of cash inflows over initial outlay of proposed…
Q: Bridgeport Company manufactures a check-in kiosk with an estimated economic life of 12 years and…
A: Lease- A binding legal agreement whereby one part, holding ownership of an asset agrees to rent the…
Q: Robinson Co. is interested in purchasing a new delivery vehicle so it can become a subcontractor…
A: Net Present Value: It is applied to series of cash flows happening at various times and represent…
Q: TJ & Parents Inc. has recently decided to go ahead with a new operating system for their business.…
A: The question is based on the concept of capital budgeting for taking lease or buying decision.…
Q: Wrangler Western has some of its jeans stone-washed under a contract with an independent contractor,…
A: Present Value of annuity = Annuity1+interest raten Present worth in Year 0 = Sum of present…
Q: Sosa Excavating Inc. is purchasing a bulldozer. The equipment has a price of $100,000. The…
A: Step1: Calculating the value of total interest that Sosa pay on this installment plan. We have,The…
Q: A contractor is constructing a project for which he will be paid in one lump sum upon satisfactory…
A: Loan for the first 6 months=$700,000 , interest rate = 1.5% per month for the first 10 month Loan…
Q: Bonita Industries is purchasing new equipment with a cash cost of $ 211800 for the assembly line.…
A: Present value = $211,800 Annuity = $45,800 Period = 6
Q: A bag manufacturer will rent a space in a mall for 24 months for an exhibit. The monthly rent is…
A: Using excel PV and PMT function to calculate the single lumpsum payment
Q: A Cookie Company has negotiated to introduce a new cookie for 6 years. The cookie would be purchased…
A: Time Cashflows 0(now) -$300000-$400000= -$700000 1 to 6 ($200-$100)*5000 =$500000 1 to 6…
Q: Coronado Excavating Inc. is purchasing a bulldozer. The equipment has a price of $107,400. The…
A: Interest Rate - The fees assessed to the borrower in exchange for the assets taken from the lenders…
Q: Deep Excavating Inc. is purchasing a bulldozer. The equipment has a price of $106,000. The…
A: Here, Cost of equipment = $ 106,000 Number of equal annual payment = 10 Equal annual payment = $…
Q: camber crporation has to decide if they can finance purchasing 10 new machines for all their…
A: All financials below are in million.Total capital expenditure = 10 machines x 1.73 / machine =…
Q: Galvanized Products is considering the purchase of a new computer system for their enterprise data…
A: Before the investing money in new assets, profitability and return from that asset is computed. This…
Q: Avalanche Company manufactures a computer with an estimated economic life of 12 years and leases it…
A: Concept of Lease Accounting
Q: Sadik Industries must install $1 million of new machinery in its Texas plant. It can obtain a 6-year…
A: Depreciation is the reduction in the value of an equipment with the time of its usage. It is used to…
Q: One year ago, JK Mfg. deposited $20,500 in an investment account for the purpose of buying new…
A:
Q: Grouper Excavating Inc. is purchasing a bulldozer. The equipment has a price of $90,500. The…
A: Total interest=Total Payment-Amount Borrowed Annual Payment=Amount borrowedPresent value annuity…
Q: Galvanized Products is considering the purchase of a new computer system for their enterprise data…
A: In this question firm wants to buy a new computer system.It will require an initial investment of…
Q: A Cookie Company has negotiated to introduce a new cookie for 6 years. The cookie would be purchased…
A: NPV means PV of net benefits arises in the future from the project. It can be simply computed by…
Q: Fortune Teller Inc., purchased a tarot card-making machine for $1 million. The CCA rate on this…
A: CCA rate is the rate which is acceptable to reduce the value of an asset beyond that rate it is not…
Q: Wrangler Western has some of its jeans stone-washed under a contract with an independent contractor,…
A: The present worth of the machine is operating cost is the present value of all future cash outflow
Q: BC Microsystems Incorporated bought a new flatbed scanner for office u stimated that a year after…
A: Money prepared will be equal to the present value of five years maintenance cost.
Q: A software company that installs systems for inventory control using RFID technology spent $600,000…
A: Inventory is the investment in material which is done by the firm. Firm maintains the level of…
Q: Anderson Manufacturing Co., a small fabricator of plastics, needs to purchase an extrusion molding…
A: As per the information provided: Principal (P) = $140,000 n = 5 g = 9% or 0.09 i = 13% or 0.13
Q: Wolfson Corporation has decided to purchase a new machine that costs $5.1 million. The machine will…
A: Cost of machine=$5,100,000 Useful life=4 years Depreciation p.a. =Cost of asset-Salvage valueUseful…
Q: Grummet Company is acquiring a new wood lathe with a cash purchase price of $80,000. The Wood Master…
A: Cash purchase price is the price needed to pay for purchase of product today in cash. If amount has…
Q: Anderson Manufacturing Co., a small fabricatorof plastics, needs to purchase an extrusion…
A: First annual payment is determined using the following formula: Principal=Annual Payment of year…
Q: A small analytical laboratory borrowed $26,000 (the original amount or the principal) at an interest…
A: Compound interest is referred as the interest which is calculated on principal amount which involves…
Q: Pearl Excavating Inc. is purchasing a bulldozer. The equipment has a price of $92,800. The…
A: Here, Equipment can be purchased by using bank loan or Manufacturer loan. Company will choose the…
Q: Amazing Manufacturing, Inc., has been considering the purchase of a new manufacturing facility for…
A: Please see the table below. Please be guided by the second column to understand the mathematics.…
Q: Kotse Automotive is planning to expand its operation by planning to add a machine costing $90,000.…
A: To choose between Option 1 and Option 2, it is required to calculate and compare Present Value Cost…
Q: Wolfson Corporation has decided to purchase a new machine that costs $3 million. The machine will be…
A: Net advantage of leasing(NAL) Net advantage of leasing is the present value of leasing the asset…
Q: avlovich Instruments, Inc., a maker of precision telescopes, expects to report pretax income of…
A:
Q: Galvanized Products is considering the purchase of a new computer system for its enterprise data…
A: Purchase price= $100000 Salvage value= $5000 Maintenance expenses= $25000/ year Savings due to…
Q: Emerson Processing borrowed $900,000 for in- stalling energy-efficient lighting and safety equipment…
A: Simple interest is based on the principal amount of a loan or the initial deposit in a savings…
Q: A supermarket can purchase an automated checkout machine for $100,000 (to be paid in year 0) that…
A: We will determine the present value of costs of both alternatives. The alternative with lower…
Q: Sheffield Excavating Inc. is purchasing a bulldozer. The equipment has a price of $93,800. The…
A: Introduction: Process Value Analysis (PVA) is a manner of assessing a company's inner strategies to…
Q: A steel mill estimates that one of its furnace will require maintenance of P20, 000.00 at the end of…
A: Annual interest rate = 6% Semi annual interest rate = 6%/2 = 3% 1. Calculation of present value…
Q: Rizzo Excavating Inc. is purchasing a bulldozer. The equipment has a price of $100,000. The…
A: a.
Q: Julong Petro Materials, Inc. ordered $10 million worth of seamless tubes for its drill collars from…
A: Information Provided: Order amount = $10 million Interest = 10% Term =10 year
Q: Galvanized Products is considering the purchase of a new computer system for its enterprise data…
A: Present value computes the existing value of future benefits by discounting future worth with a…
Q: Harding Company is in the process of purchasing several large pieces of equipment from Danning…
A: The present value refers to the value of future cash flows at present. To choose between different…
Q: A company that makes self-clinching fasteners expects to purchase new production-line equipment in 3…
A:
Q: paying PHP17,000 every year for 7 years, each payment being made in the beginning of each year. The…
A: Since the payments are made at the start of the year so to find the cash price that is the present…
Q: A Cookie Company has negotiated to introduce a new cookie for 6 years. The cookie would be purchased…
A: NPV Its usage is done in both investment planning as well as in capital budgeting for doing…
Q: Mustang Enterprises, Inc., has been considering the purchase of a new manufacturing facility for…
A: Nominal rate is unadjusted interest rate; whereas, real rate is inflation adjusted interest rate.…
Trending now
This is a popular solution!
Step by step
Solved in 2 steps with 1 images
- Electro Corporation bought a new machine and agreed to pay for it in equal annual installments of 5,000 at the end of each of the next 5 years. Assume a prevailing interest rate of 15%. The present value of an ordinary annuity of 1 at 15% for 5 periods is 3.35. The future amount of an ordinary annuity of 1 at 15% for 5 periods is 6.74. The present value of 1 at 15% for 5 periods is 0.5. How much should Electro record as the cost of the machine? a. 12,500 b. 16,750 c. 25,000 d. 33,700On August 1, 2019, Kern Company leased a machine to Day Company for a 6-year period requiring payments of 10,000 at the beginning of each year. The machine cost 40,000 and has a useful life of 8 years with no residual value. Kerns implicit interest rate is 10%, and present value factors are as follows: Present value for an annuity due of 1 at 10% for 6 periods4.791 Present value for an annuity due of 1 at 10% for 8 periods5.868 Kern appropriately recorded the lease as a sales-type lease. At the inception of the lease, the Lease Receivable account balance should be: a. 60,000 b. 58,680 c. 48,000 d. 47,910Scrimiger Paints wants to upgrade its machinery and on September 20 takes out a loan from the bank in the amount of $500,000. The terms of the loan are 2.9% annual interest rate and payable in 8 months. Interest is due in equal payments each month. Compute the interest expense due each month. Show the journal entry to recognize the interest payment on October 20, and the entry for payment of the short-term note and final interest payment on May 20. Round to the nearest cent if required.
- Gardner Denver Company is considering the purchase of a new piece of factory equipment that will cost $420,000 and will generate $95,000 per year for 5 years. Calculate the IRR for this piece of equipment. For further Instructions on internal rate of return in Excel, see Appendix C.Now assume that it is several years later. The brothers are concerned about the firm’s current credit terms of net 30, which means that contractors buying building products from the firm are not offered a discount and are supposed to pay the full amount in 30 days. Gross sales are now running $1,000,000 a year, and 80% (by dollar volume) of the firm’s paying customers generally pay the full amount on Day 30; the other 20% pay, on average, on Day 40. Of the firm’s gross sales, 2% ends up as bad-debt losses. The brothers are now considering a change in the firm’s credit policy. The change would entail: (1) changing the credit terms to 2/10, net 20, (2) employing stricter credit standards before granting credit, and (3) enforcing collections with greater vigor than in the past. Thus, cash customers and those paying within 10 days would receive a 2% discount, but all others would have to pay the full amount after only 20 days. The brothers believe the discount would both attract additional customers and encourage some existing customers to purchase more from the firm—after all, the discount amounts to a price reduction. Of course, these customers would take the discount and hence would pay in only 10 days. The net expected result is for sales to increase to $1,100,000; for 60% of the paying customers to take the discount and pay on the 10th day; for 30% to pay the full amount on Day 20; for 10% to pay late on Day 30; and for bad-debt losses to fall from 2% to 1% of gross sales. The firm’s operating cost ratio will remain unchanged at 75%, and its cost of carrying receivables will remain unchanged at 12%. To begin the analysis, describe the four variables that make up a firm’s credit policy and explain how each of them affects sales and collections.For each of the following unrelated situations, calculate the annual amortization expense and prepare a journal entry to record the expense: A. A patent with a ten-year remaining legal life was purchased for $300,000. The patent will be usable for another eight years. B. A patent was acquired on a new smartphone. The cost of the patent itself was only $24,000, but the market value of the patent is $600,000. The company expects to be able to use this patent for all twenty years of its life.
- Using the information provided, what transaction represents the best application of the present value of an annuity due of $1? A. Falcon Products leases an office building for 8 years with annual lease payments of $100,000 to be made at the beginning of each year. B. Compass, Inc., signs a note of $32,000, which requires the company to pay back the principal plus interest in four years. C. Bahwat Company plans to deposit a lump sum of $100.000 for the construction of a solar farm In 4 years. D. NYC Industries leases a car for 4 yearly annual lease payments of $12,000, where payments are made at the end of each year.Calico Inc. purchased a patent on a new drug it created. The patent cost $12,000. The patent has a life of twenty years, but Calico expects to be able to sell the drug for fifty years. Calculate the amortization expense and record the journal for the first years expense.For each of the following unrelated situations, calculate the annual amortization expense and prepare a journal entry to record the expense: A. A patent with a seventeen-year remaining legal life was purchased for $850,000. The patent will be usable for another six years. B. A patent was acquired on a new tablet. The cost of the patent itself was only $12,000, but the market value of the patent is $150,000. The company expects to be able to use this patent for all twenty years of its life.
- Consolidated Aluminum is considering the purchase of a new machine that will cost $308,000 and provide the following cash flows over the next five years: $88,000, 92,000, $91,000, $72,000, and $71,000. Calculate the IRR for this piece of equipment. For further instructions on internal rate of return in Excel, see Appendix C.Big Sky Mining Company must install 1.5 million of new machinery in its Nevada mine. It can obtain a bank loan for 100% of the purchase price, or it can lease the machinery. Assume that the following facts apply. (1) The machinery falls into the MACRS 3-year class. (2) Under either the lease or the purchase, Big Sky must pay for insurance, property taxes, and maintenance. (3) The firms tax rate is 25%. (4) The loan would have an interest rate of 15%. It would be nonamortizing, with only interest paid at the end of each year for four years and the principal repaid at Year 4. (5) The lease terms call for 400,000 payments at the end of each of the next 4 years. (6) Big Sky Mining has no use for the machine beyond the expiration of the lease, and the machine has an estimated residual value of 250,000 at the end of the 4th year. a. What is the cost of owning? b. What is the cost of leasing? c. What is the NAL of the lease?