Mod 3 Assignemnts P5-4 and P6-7

Mod 3 Assignemnts P5-4 and P6-7 - annuity due method would...

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KISHWAUKEE CORPORATION Balance Sheet (000’s) December 31, 2010 Assets Current Assets Cash 175,900 Appropriated Cash & Investment Cash 70,000 Treasury Notes 138,000 208,000 208,000 Accounts Receivable 170,000 Inventories 312,100 Long Term Assets Buildings 1,640,000 Land 950,000 Intangible Assets Goodwill 120,000 Other Assets $3,663,000 Liabilities and Owner’s Equity Current Liabilities Current Portion of Notes Payable 100,000 Reserve for Depreciation 410,000 Federal Income Taxes payable 75,000 Long Term Debt 500,000 Owner’s Equity Retained earnings 858,000
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Appreciation Capital 570,000 Common Stock 1,150,000 $3,663,000 P6-7 (a) This problem does not require PV or FV calculations, since the interest rate is presumed the same. The
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Unformatted text preview: annuity due method would only provide $960,000 at the end of 12 years while the single lump sum method will provide $1,900,000. The interest rate on both methods would be about 9.5%. (b) 8% (c) $724,584 = 2% discount rate over 5 years (arrived by considering total return of 10% = 8% stated + 2% discount rate) (d) Target savings $1,300,000. Single sum of $200,000 @ 2.5% for 40 periods = $537,012 Rent amount of $30,394.56 @ 2.5% for 40 periods = $762,988 $1,300,000 Answer is: Rent amount of $30,394.56 at the end of each quarter for 10 years....
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Mod 3 Assignemnts P5-4 and P6-7 - annuity due method would...

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