Question 1

Bill and Ellen Sweatt plan to invest $2500 a year in an educational IRA for their granddaughter Sloane Martin. They will make these deposits on January 2^nd of each year. Bill and Ellen feel they can safely earn 8%. How much will be in this account on December 31 of the 18^th year?

Accepted Answer

The answer of Bill and Ellen Sweatt plan to invest...

Question 2

Dexter Company is considering purchasing equipment. The equipment will produce the following cash flows: $$\begin{array} { l l } 
\text { Year 1 } & \$ 120,000 \
\text { Year 2 } & \$ 200,000
\end{array}$$ Dexter requires a minimum rate of return of 10%. What is the maximum price Dexter should pay for this equipment?

Accepted Answer

A)  $274381 
B)  $165290 
C)  $320000 
D)  $160000

Question 3

In present value calculations the process of determining the present value is called

Accepted Answer

A)  allocating. 
B)  pricing. 
C)  negotiating. 
D)  discounting.

Question 4

Wingate Company borrowed $90000 on January 2 2017. This amount plus accrued interest of 6% compounded annually will be repaid at the end of 3 years. What amount will Wingate repay at the end of the third year?

Accepted Answer

The answer of Wingate Company borrowed $90000 on January 2...

Question 5

Lamb Company deposited $15000 annually for 6 years in an account paying 5% interest compounded annually. What is the balance of the account at the end of the 6th year?

Accepted Answer

The answer of Lamb Company deposited $15000 annually for 6...

Question 6

Which table has a factor of 1.00000 for 1 period at every interest rate?

Accepted Answer

A)  Future value of 1 
B)  Future value of an annuity of 1 
C)  Present value of 1 
D)  Present value of an annuity of 1

Question 7

CVS leases a building for 20 years. The lease requires 20 annual payments of $10000 each with the first payment due immediately. The interest rate in the lease is 10%. What is the present value of the cost of leasing the building?

Accepted Answer

The answer of CVS leases a building for 20 years....

Question 8

The amount you must deposit now in your savings account paying 5% interest in order to accumulate $10000 for your first tuition payment when you start college in 3 years is

Accepted Answer

A)  $8500. 
B)  $7830. 
C)  $8638. 
D)  $8860.

Question 9

The amount you must deposit now in your savings account paying 6% interest in order to accumulate $6000 for a down payment 5 years from now on a new car is

Accepted Answer

A)  $1200. 
B)  $4484. 
C)  $4477. 
D)  $4200.

Question 10

Chang Company earns 12% on an investment that will return $400000 eleven years from now. What is the amount Chang Company should invest now to earn this rate of return?

Accepted Answer

The answer of Chang Company earns 12% on an investment...

Question 11

Flower Company is considering an investment which will return a lump sum of $2500000 six years from now. What amount should Flower Company pay for this investment to earn an 11% return?

Accepted Answer

The answer of Flower Company is considering an investment which...

Question 12

Perdue Company has purchased equipment that requires annual payments of $30000 to be paid at the end of each of the next 6 years. The appropriate discount rate is 12%. What amount will be used to record the equipment?

Accepted Answer

A)  $180000 
B)  $123342 
C)  $165772 
D)  $115650

Question 13

If Kelly Cranford invests $11970 now she will receive $40000 at the end of 14 years. What annual rate of return will Kelly earn on her investment?

Accepted Answer

The answer of If Kelly Cranford invests $11970 now she...

Question 14

Bill Cigarettes acquired a bad habit of smoking in high school. Bill spends approximately $70 a month or $840 a year on cigarettes. He is not concerned with health issues but he is keenly aware of financial issues. Show Bill how much he would have at retirement in 20 years if he invested $840 a year at 8% instead of smoking.

Accepted Answer

The answer of Bill Cigarettes acquired a bad habit of...

Question 15

Which of the following accounting problems does not involve a present value calculation?

Accepted Answer

A)  The determination of the market price of a bond. 
B)  The determination of the declining-balance depreciation expense. 
C)  The determination of the amount to report for long-term notes payable. 
D)  The determination of the amount to report for lease liability.

Question 16

Payments or receipts of equal dollar amounts are referred to as __________________.

Accepted Answer

The answer of Payments or receipts of equal dollar amounts...

Question 17

Many companies calculate the future value of the cash flows involved in an investment in evaluating long-term capital investments.

Accepted Answer

A) True 
 B)False

Question 18

A higher discount rate produces a higher present value.

Accepted Answer