INTERMEDIATE ACCOUNTING
3rd Edition
ISBN: 9780136946694
Author: GORDON
Publisher: RENT PEARS
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Chapter 7, Problem 7.20E
To determine
The expected cash flows in the given scenarios and their comparison.
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QI. KNOWLEDGE AND UNDERSTANDING
DRAWING CASH FLOW DIAGRAM
Draw the
ww m mm
cash flow diagram for the following :
1. Assume that you want to deposit an amount (BD120,000.00) into an account three
years from now in order to be able to withdraw BD750 per year for ten years
starting four years from now. Assume that the interest rate is 4.5% per year.
Construct the cash flow diagram.
2. Suppose that you want to make a deposit into your account now such that you can
withdraw an equal amount (A1) of BD300 per year for the first five years starting
one year after your deposit and a different annual amount (A2) of BD600 per year
for the following three years. With an interest rate (i) of 5.5% per year, construct the
cash flow diagram.
3. If you deposit BD1,500 now, BD3,600 three years, BD2000 seven years, and
BD1,800 nine years from now in a savings account that pays 10% interest, how
much would you have at the end of year 25? Construct the cash flow diagram.
Quantitative Problem: You own a security with the cash flows shown below.
0
$
0
1
2
3
640
375
250
310
If you require an annual return of 10%, what is the present value of this cash flow stream? Do not round intermediate calculations. Round your answer to the nearest
cent.
Consider the following cash flows:
Year
Cash Flow
0
-$ 28,900
1
14,800
2
3
14,100
10,500
a. What is the profitability index for the cash flows if the relevant discount rate is 8 percent?
Note: Do not round intermediate calculations and round your answer to 3 decimal places, e.g., 32.161
b. What is the profitability index if the discount rate is 13 percent?
Note: Do not round intermediate calculations and round your answer to 3 decimal places, e.g., 32.161
c. What is the profitability index if the discount rate is 20 percent?
Note: Do not round intermediate calculations and round your answer to 3 decimal places, e.g., 32.161
Answer is not complete.
0.181 ×
a. Profitability index
b. Profitability index
c. Profitability index
Chapter 7 Solutions
INTERMEDIATE ACCOUNTING
Ch. 7 - Prob. 7.1QCh. 7 - Prob. 7.2QCh. 7 - If interest is compounded more than once a year,...Ch. 7 - Prob. 7.4QCh. 7 - Can an ordinary annuity table be used to determine...Ch. 7 - Prob. 7.6QCh. 7 - Is the present value of an ordinary annuity more...Ch. 7 - Prob. 7.8QCh. 7 - Simple Interest. Assume Shafer Corporation...Ch. 7 - Compound Interest. Assume Shafer Corporation...
Ch. 7 - Prob. 7.3BECh. 7 - Prob. 7.4BECh. 7 - Prob. 7.5BECh. 7 - Present Value of a Single Sum, Compound Interest....Ch. 7 - Future Value of a Single Sum, Compound Interest....Ch. 7 - Prob. 7.8BECh. 7 - Present Value of a Single Sum, Compounded Interest...Ch. 7 - Prob. 7.10BECh. 7 - Present Value of a Single Sum, Calculating Time...Ch. 7 - Future Value of an Ordinary Annuity. An...Ch. 7 - Future Value of an Annuity Due. Mariah Carey...Ch. 7 - Future Value of an Ordinary Annuity: Calculating...Ch. 7 - Present Value of an Ordinary Annuity. CB...Ch. 7 - Present Value of an Annuity Due, Semiannual...Ch. 7 - Prob. 7.17BECh. 7 - Ordinary Annuity, Annuity Due, Using Interest...Ch. 7 - Prob. 7.2ECh. 7 - Prob. 7.3ECh. 7 - Prob. 7.4ECh. 7 - Prob. 7.5ECh. 7 - Prob. 7.6ECh. 7 - Prob. 7.7ECh. 7 - Future Value of an Ordinary Annuity, Future Value...Ch. 7 - Single Sum, Solving for Other Variables. Two...Ch. 7 - Ordinary Annuity, Solve for Interest Rate,...Ch. 7 - Present Value, Note Payable Prices. Wiz Khalifa...Ch. 7 - Future Value of a Deterred Annuity. Lenny Shafer...Ch. 7 - Prob. 7.13ECh. 7 - Present Value of an Ordinary Annuity, Present...Ch. 7 - Prob. 7.15ECh. 7 - Prob. 7.16ECh. 7 - Future Value of an Annuity Due, Decision Making....Ch. 7 - Prob. 7.18ECh. 7 - Prob. 7.19ECh. 7 - Prob. 7.20ECh. 7 - Prob. 7.21ECh. 7 - Prob. 7.22ECh. 7 - Prob. 7.1PCh. 7 - Present Value, Present Value of an Ordinary...Ch. 7 - Present Value, Present Value of an Annuity Due,...Ch. 7 - Prob. 7.4PCh. 7 - Prob. 7.5PCh. 7 - Prob. 7.6PCh. 7 - Prob. 7.7PCh. 7 - Present Value of an Annuity Due, Deferred...Ch. 7 - Present Value of an Ordinary Annuity, Present...Ch. 7 - Future Value of an Ordinary Annuity, Deferred...Ch. 7 - Present Value, Present Value of an Ordinary...Ch. 7 - Prob. 7.12PCh. 7 - Prob. 7.13PCh. 7 - Prob. 7.14PCh. 7 - Prob. 7.15P
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- Consider the following cash flows: Year Cash Flow 0 -$ 29,500 1 14,200 2 3 14,700 11,100 a. What is the profitability index for the cash flows if the relevant discount rate is 10 percent? Note: Do not round intermediate calculations and round your answer to 3 decimal places, e.g., 32.161. b. What is the profitability index if the discount rate is 15 percent? Note: Do not round intermediate calculations and round your answer to 3 decimal places, e.g., 32.161. c. What is the profitability index if the discount rate is 22 percent? Note: Do not round intermediate calculations and round your answer to 3 decimal places, e.g., 32.161. a. Profitability index b. Profitability index c. Profitability indexarrow_forwardConsider the following cash flows: Year Cash Flow 0 -$ 14,800 1 8,400 2 7,600 4,300 a. What is the profitability index for the above set of cash flows if the relevant discount rate is 10 percent? Note: Do not round intermediate calculations and round your answer to 3 decimal places, e.g., 32.161. b. What is the profitability index if the discount rate is 15 percent? Note: Do not round intermediate calculations and round your answer to 3 decimal places, e.g., 32.161. c. What is the profitability index if the discount rate is 22 percent? Note: Do not round intermediate calculations and round your answer to 3 decimal places, e.g., 32.161. a. Profitability index b. Profitability index c. Profitability indexarrow_forwardConsider the following cash flow diagram. What value of C makes the inflow series equivalent to the outflow series at an interest rate of 10% compounded annually? $500 2C a) b) $300 1 21 31 4₁ 51 61 7i 8₁ I I I I Years i I I I I I Y Y Y 9 10 11 I I I I I ссссссссс с Write an equation with factor notations, Solve for Carrow_forward
- Present value For the case shown in the following table, calculate the present value of the cash flow, discounting at the rate given and assuming that the cash flow is received at the end of the period noted. (Click on the icon here in order to copy the contents of the data table below into a spreadsheet.) Single cash flow $7,000 The present value is $ (Round to the nearest cent.) Discount rate 12% End of period (years) 4arrow_forwardUneven Cash Flow Stream Find the present values of the following cash flow streams. The appropriate interest rate is 6%. Round your answers to the nearest cent. (Note that, when working with the calculator's cash flow register, you must enter CF0 = 0. ) Year Cash Stream A Cash Stream B 1 $100 $300 2 400 400 3 400 400 4 400 400 5 300 100 Stream A $ _______Stream B $ _______arrow_forwardPresent value For the case shown in the following table, calculate the present value of the cash flow, discounting at the rate given and assuming that the cash flow is received at the end of the period noted. (Click on the icon here in order to copy the contents of the data table below into a spreadsheet.) The present value is $ Single cash flow $101,000 (Round to the nearest cent.) Discount rate 12% End of period (years) 22arrow_forward
- You are planning to withdraw $500 at the end of year 3, $700 at the end of year 4, and $900 at the end of year 6. At a 10% interest rate, what is the present worth of these withdrawals? Please draw the cash flow diagram too.arrow_forwardIn the following cash flows diagram, Determine the value of F that makes the two cash flows diagrams equivalent if the interest rate i = 12% per year? 100 100 100 100 100 100 F 1 2 3 4 6 3 5 End of Year End of Year a. $428 b. $596 С. $704 d. $686 O Oarrow_forwardWhat is the value of the following cash flows in year 6? What is the value today? Assume interest rates today are 6.5%, then rates will be 6.25% for the next 4 years, 3.75% for the next 3 years, 5.3% for the next 4 years, and 3.75% thereafter. year cashflow 6 5,675 8 9,725 10 6,750 17 11,750 Must show work with formulas provided.arrow_forward
- please solve using equation method. do not use excel Given the following cash flows, find the internal rate of return. Use an interest rate of 8% as a starting point. Provide your answer as a percentage to the nearest hundredth. Year Cash Flow -$1,000 $200 $200 3 $200 $200 5. $200 6. $400arrow_forwardFor the following cash flow series, which of the statements is true? Year Future Value 0 $200.00 1 $200.00 2 $200.00 a) The NPV is $561.60 at a discount rate of 6%. b) The NPV is $556.65 at a discount rate of 8%. c) The IRR is 9.81%. d) The payback is 2 years. e) None of the above.arrow_forwardProblem 2. What is the present value of the following cash flows, if the discount rate is 10% annually? Beginning Cash Flow of Year 1 P2,500 2 2,750 3 3,000 4 3,250 5 3,500arrow_forward
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