Pete's Real Estate is currently valued at $79,000. Pete feels the value of his business will increase at a rate of 10% per year, compounded semiannually for the next 5 years. At a local fund-raiser, a competitor offered Pete $84,000 for the business. If he sells, Pete plans to invest the money at 8% compounded quarterly. What price should Pete ask? (Use Table 1 and Table 2 provided.) Note: Do not round intermediate calculations. Round your answer to the nearest cent. Price

Pete's Real Estate is currently valued at $79,000. Pete feels the value of his business will increase at a rate of 10% per year, compounded semiannually for the next 5 years. At a local fund-raiser, a competitor offered Pete $84,000 for the business. If he sells, Pete plans to invest the money at 8% compounded quarterly. What price should Pete ask? (Use Table 1 and Table 2 provided.) Note: Do not round intermediate calculations. Round your answer to the nearest cent. Price

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Nate agreed to pay $550,000 for a house. He made a $125,000 down payment and financed the balance using a 30-year, 9 % per annum compounded monthly conventional loan. a) How much were his monthly payments? b) If he sold the house for $700,000 after 6 years, how much equity did he have in the house? c) How much is his contribution to his loan (Principal and Interest)?
Susan Orman wants to pay $1,500 semiannually to her granddaughter for 10 years for helping her around the house. If Susan can invest money at 6% compounded semiannually, how much must she invest today to meet this goal? (Please use the following provided Table.)
Done Present value interest factor of $1 per period at i% for n periods, PVIF(i,n). 5.5% 9.0% 9.5% 1 0.9754 0.9515 0.9057 0.9705 0.8880 0.9420 0.9145 0.9327 0.9010 0.9657 0.9609 0.9561 0.5847 0.3505 0.9513 0.8963 0.9466 0.9419 0.8874 0.5897 0.5568 0.8489 0.8364 0.9372 0.8787 0.8240 0.7254 0.6810 0.6394 0.8118 0.7579 0.7077 0.6611 0.6178 0.9326 0.8700 0.8613 0.5643 0.5303 0.5400 0.5051 0.5167 0.4810 0.9279 0.7999 0.6905 0.6419 0.5553 0.5969 0.8528 0.6736 0.7880 0.9233 0.5767 0.5339 0,4945 0.9187 0.8444 0.7764 0.6572 0.5572 0.4732 0.5134 0.4581 0.4363 0.4155 0.3957 0.8360 0.9141 0.7649 0.6412 0.5874 0.5384 0.4936 0.2120 0.4528 0.9096 0.8277 0.6255 0.7536 0.5703 0.5202 0.1945 0.4746 0.4333 0.9051 0.6730 0.6103 0.5537 0.5026 0.4564 0.4146 0.3769 0.1784 0.1628 0.5954 0.5375 0.1803 0.1637 0.1487 7.5% 10.0% 8.0 % 8.5% 6.5% 7.0% 4.5% 6.0% 5.0% 2.5% 3.0% 3.5% 4.0% 2.0% 1.5% 1.0% Period 0.5% 0.9390 0.9346 0.9302 0.9259 0.9217 0.9174 0.9132 0.9091 0.9950 0.9901 0.9852 0.9804 0.9756 0.9709 0.9662…
Phil Nelson’s uncle has decided to retire to Arizona in 12 years. What amount should he invest today so that he will be able to withdraw $32,000 at the end of each year for 17 years after he retires? Assume he can invest the money at 7% interest compounded annually.
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Ian loaned his friend $25,000 to start a new business. He considers this loan to be an investment, and therefore requires his friend to pay him an interest rate of 9% on the loan. He also expects his friend to pay back the loan over the next four years by making annual payments at the end of each year. Ian texted and asked that you help him calculate the annual payments that he should expect to receive so that he can recover his initial investment and earn the agreed-upon 9% on his investment. Calculate the annual payment and complete the following capital recovery schedule: Year Beginning Amount Payment Interest Paid Principal Paid Ending Balance 1 $25,000.00 2 3 4 -$0.01
You hire Thomas to work for you for five years, and you agree to put away enough money as a lump sum now to fund an annuity for him. At the end of those five years, he will retire and may begin drawing out $ 20,000 per year for five years, starting on the last day of each year (in this case, the end of year 6, from when this arrangement began, through year 10). How much must you invest today if your guaranteed interest rate is 3% compounded annually for all 10 years?
Ian loaned his friend $25,000 to start a new business. He considers this loan to be an investment, and therefore requires his friend to pay him an interest rate of 9% on the loan. He also expects his friend to pay back the loan over the next four years by making annual payments at the end of each year. Ian texted and asked that you help him calculate the annual payments that he should expect to receive so that he can recover his initial investment and earn the agreed-upon 9% on his investment. Calculate the annual payment and complete the following capital recovery schedule:
You hire Thomas to work for you for five years, and you agree to put away enough money as a lump sum now to fund an annuity for him. At the end of those five years, he will retire and may begin drawing out $20,000 per year for five years, starting on the last day of each year (in this case, the end of year 6, from when this arrangement began, through year 10). How much must you invest today if your guaranteed interest rate is 3% compounded annually for all 10 years? (RESOURCE: Annuities) Note: Another two-stage present value problem, involving first finding a present value at a starting point (even though it occurs in our future!) that will generate a series of future payments and then calculating a single-amount present value today to achieve that future goal when payments (withdrawals) will begin. Please show how to solve for both steps, thank you!
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