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Midterm 987 solution accounts

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Question;QuestionScore10203040506070809010#REF!Late0Total#REF!MidtermExam,2014NameQuestion1Joicehassaved$5,000thatwillbeadownpayment onanewcarthatcanbepurchasedfor$38,000.Theloantofinance thiswillhavearateof7.125% APRcompoundedmonthly. Whatwillthemonthlypaymentsona thecarbeiftheloanisfor4years??b Howlongwouldittaketopayofftheloanifshewouldpay$1,000 monthly?Joicehasbeenoffered aleaseforthiscarwithpaymentsof$600amonthfor5years. Therewouldnotbeanydownpayment.Ashappenswithleases, shewouldessentiallyreceive thefullvalueofthecartodayandshewouldreturnc thecartothedealerattheendofthelease(essentiallypayingoutthevalueofthecaratthattime). Thevalueofthiscarin5years, withnodamageorexcessivemileage, isexpectedtobe$12,000. WhatAPRwithmonthlycompoundingwouldshebepaying?SolutionTony has decided to make a $500 monthly investmentin a retirement fund.The three funds in which he is interestedall pay2.00% APR but with different compounding frequencies.. How much will Tony accumulate in 30 years for each of the threeinvestmentalternatives?a Interest of 2.00% APR compoundedweekly (52 times per year)b Interest of 2.00% APR compoundedmonthly (12 times per year)c Interest of 2.00% APR compoundedannually (1 time per year)SolutionPeter has won $250,000 in a lottery that he is goingto invest. He has narrowed down his search to three funds that eachhave different stated rates.How much will Peteraccumulate in 30 years for each of the three investmentalternatives?a 6.15% APR with monthlyb 0.50% monthlyPIRc 6.25% EARSolutionQuestion 4Jackson is consideringwhether to invest monthly, quarterly or annually in a fund that earns7% APR with monthlycompounding. How much will Jackson accumulate in 30 years for each of the three investmentalternatives shown below?Assume that months are equal in length and that there is no initial deposit in year0.Years30APR7.00%Monthly CompoundingSolutionQuestion5Cheapskateusedcardealer offersthefollowing automobilefinance opportunity.Monthly paymentsontheloanare3%oftheloanamountfor36months.Theloanamountisafteranydownpayment. Inadditiontheloanwillrequire a$1,500upfrontloanprocessingfeethatisnotincluded intheloan.a Foraloanof$20,000, whatistheAPRwithmonthly compoundingwithouttheupfrontfee?b Foraloanof$20,000, whatistheAPRwithmonthly compoundingwiththeinclusion oftheupfrontfee?SolutionQuestion 6Michael has developed a financial retirement strategy.His plan is to invest in somewhat risky stocks for 15 yearsand thenmove everythingto low risk bonds for the retirementyearsas described below.Michael presently has $250,000 in a retirementaccount that will be invested in a stock fund that has historicallyearned12% annually (EAR) with no dividends. The plan is to add an additional $25,000to the fund at the beginning of each of theupcoming 15 years.When he retires, he will reinvestthe stock fund in a tax?free municipal bonds and live on the coupons only that have acoupon rate of 2.5% paid semi?annually. (the bonds will be donated to charity upon his death).How much will Michael receive semi?annually during retirement?SolutionQuestion7Maxisstartinganewcompanywithaninvestmentof$500,000.Heexpectssalestogrowarithmeticallyby$100,000 ayearforfiveyears, withsalesinyear1being$100,000,year2$200,000, etc..Thenforyears6?10salesareforecasttogrowgeometricallyatarateof30%peryear(year6salesgrow30%overyear5,year730%overyear6,etc.)Attheendofeachyear,foryears1?10,Maxexpects profitstobealleast10%ofthesaleseachyearandhewillinvest10%ofprofitsinafundthatearns6%APRcompoundedmonthly.a What willbethevalue oftheinvested fundsinyear10?b Didthe10yearsofprofits coverherinitial investment?SolutionQuestion8TheMarketing,Inc.hascollected thefollowingdataforthepastyear.Prepareaformalincomestatementthat containstherelevantsubtotals.Showvalues inwholedollars (nocents).Assumethatnotaxesaredueonassetpurchasesorsales.Data BlockBeginningofyearDuring YearEnd ofyearCashOnHand$330,500QuantitySold45,200QuantityProduced38,000SalesPrice$54.00Costperunittoproduce$24.50StaffExpenses$424,600FacilityExpenses$387,200AssetSale$1,575,300AssetPurchase$2,204,000Taxrate20%Inventory$57,000$24,000AccountsReceivable$74,000$38,000AccountsPayable$68,000$62,000Depreciation$48,000InterestPaidonLoan$46,000LoanPrinciplepayment$125,000Dividends$128,000SolutionQuestion 9Prepareacashflowstatement usingthefollowing data. Assume thatnotaxesaredueonassetpurchasesorsales.Prepareaformalcashflowstatementthatcontains therelevantsubtotals. Showvaluesinwholedollars (nocents).Data BlockBeginning of yearDuring YearEnd of yearCash$630,600Net Income$1,200,000Staff Expenses$724,600Facility Expenses$887,200Asset Sale$156,530AssetPurchase$1,240,400Tax rate22.5%Inventory$87,000$84,000Accounts Receivable$73,000$78,000AccountsPayable$78,000$75,000Depreciation$89,500Interest Paid on Loan$76,000Loan Principle payment$50,000Dividends Paid$200,000SolutionScoreQuestion10Nina and Noah have started a small business that seems to be thriving. Friends have suggested that they should consider legally organizing as something other than the present proprietorship.They are asking for your advice via email (you do not know them). Compose up to five questions and state the purpose of each question that could be used to collect information about Nina and Noah and their business that is relevant to making a recommendation on how they should legally organize their business.Answer below using approximately 50 words per question)12345

 

Paper#41183 | Written in 18-Jul-2015

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