TVM Problem Set

TVM Problem Set - per year If AMT has a discount/interest...

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Professor Eskew’s Time Value of Money Problem Set 1. Find the interest rate implicit in a borrowing of $200,000 that the borrower discharges with annual installments of $47,479.28 each, paid at the ends of years 1 through 5. 2. A single payment note promises the lender $125,440 at maturity. EWE Company, the issuer of the note, exchanges the note for land with a fair value of $100,000. The exchange of the note for land occurs two years before the maturity date on the note. a.What interest rate will the accounting impute for this single payment note? b. Using the imputed interest rate, construct an amortization schedule for the note. c.Assume the note was exchanged for land on April 1, 2009, and that EWE’s fiscal year ends on 12/31. Make the necessary journal entries for 2009, 2010, and 2011. 3. AMT Plumbing switched from delivery trucks with gasoline engines to ones with diesel engines. The diesel trucks cost $3,000 more than gasoline engine trucks but have $1,500 lower fuel costs
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Unformatted text preview: per year. If AMT has a discount/interest rate of .008% per month, how many months must the diesel trucks remain in service for the switch to diesel trucks to be sensible. 4. Your company needs to purchase a car for one of its sales staff. The dealer offers to finance the entire $35,000 purchase price over 72 months with the first monthly payment due one month after the purchase. a.What monthly payment would you expect the company to make assuming the dealer offers an annual interest rate of 3.6% (.003% per month)? b. What is the total amount of interest paid over the 72 months? c.What would be the payment per month and the total interest if the interest rate rises to 4.8% per month (.004% per month)? d. What would be the monthly payment and the total interest rate if the car is financed over 60 months at 3.6% (.003% per month)?...
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