Chapter 6
Chapter 7
Problem 19
The cost of not refunding is the present value of the future cash flows to be paid out until
maturity, which is also the current price of the bond
PB = PMT [PVFAk,n] + FV [PVFk,n]
PB = $80 [PVFA5,20] + $1,000 [PVF5,20]
= $80
Chapter 6
Question 13
Capitalizing a stream of earnings in perpetuity can be described as a constant stream of earnings
that can be expected to go on forever has a finite present value. The idea is useful in valuing
businesses use this idea successfully i
Chapter 6
Question 6
Deferred payments are payments agreed upon between the buyer and seller to be completed in
the future without interest charges. This type of transaction is really being done at a price that is
based on the present value amount which w
Chapter 6
Problem 44
Payments for two years at 6% interest = 24 months or pay periods at 6% which provides this data
for calculation;
I/Y = 6
N = 24
PMT = 250
CPT FV = 12,703.89
It shows that after 2 years Joe will have $12,703.89 in the bank.
Using the a
Chapter 6
Problem 37
a
b
c
d
PV = $178,000; n = 360, I/Y = 0.5; FV=0; CPT PMT = $1,067.20
The interest in the first payment is the opening loan balance times the monthly rate
$178,000 x .06/12 = $890.00
Total interest over the life of the loan is total pa
Chapter 6
Problem 24
a) The formula provided states that [FVFk,a+b] = [FVFk,a] [FVFk,b]
Based on the information, in order to calculate we can determine that (1+k)a+b = (1+k)a(1+k)b,
Also that FVFk, n= (1+k)n
So we can calculate that,[FVFk,92] = [FVFk,60]
Chapter 6
Question 14
Problem 23
The amount that Charlies note will pay in five years is calculated as;
FV = PV[FVF 6,5 ]
= $8,000(1.3382)
Charlies note will pay = $10,705.60
At a 14% discount by the bank, Joe will receive;
PV = FV[PVF 14,5 ]
= $10,705.60
Problem 5-1A
Date
1-Jul
2-Jul
2-Jul
July 3
July 8
July 8
July 9
July 11
July 12
Journal
Transaction type
Ledger T Account
Debit
Credit
Purchase Merchandise Inventory
Accounts payable - Boyden
Purchased goods on credit terms 1/15, n/30
$
Account receivable
The case of Pelman v. McDonalds Corp centers around the issue of product liability concerning
negative health effects from the consumption of the products sold by the corporation. The suit alleges
that McDonalds bears liability for Ms. Pelmans and Ms. Bra
Amanda Homer
Session Eight Homework
E24-11
1.)
Grandpa Joe's Cookie Company
There will be a profit center for producing profit through generating sales and controlling costs. - Baker
There will be a revenue center that will be soley responsbile for genera
Amanda Homer
Session Seven Homework
E22-12
Carlos Ramirez
1.)
Income Statement Performance Report
For Year End December 31, 2015
Actual
Budget Variance
Output Units
15,000
20,000
-5,000
Sales Revenue
4,350,000 3,800,000 550,000
Variable Expenses
3,262,000
Amanda Homer
Session Six Homework
E21-14
1.)
2.)
3.)
4.)
Rate of Return
Internal Rate of Return
Net Present Value
Payback Period
Answers
B
D
C
A
E21-15
Preston Company
1.)
Payback Period =
Amount Invest
Expected Net Cash Inflows
1,100,000
297,000
=
6 year
APPLY YOUR KNOWLEDGE:
COLGATE-PALMOLIVE
Amanda Homer
Rebecca Walters
Carlos Ramirez
Kathleen Giovine
KEY POINTS:
Colgate Palmolive operates two product segments.
Calculate ROI for each segment.
Go to the company Web site and look under "for
investors. Fro