Computation of present value

Assignment Help Finance Basics
Reference no: EM13848773

 E6-5:        (Computation of Present Value) Using the appropriate interest table, compute the present values of the following periodic amounts due at the end of the designated periods.

                          1.     $30,000 receivable at the end of each period for 8 periods compounded at 12%.                                                                                                                                                          

                            2.     $30,000 payments to be made at the end of each period for 16 periods at 9%.      

            3.      $30,000 payable at the end of the seventh, eighth, ninth, and tenth periods at 12%.

 

 E6-10       (Unknown Periods and Unknown Interest Rate) Consider the following independent situations.

1.     Mike Finley wishes to become a millionaire. His money market fund has a balance of $92,296 and has a guaranteed interest rate of 10%. How many years must Mike leave that balance in the fund in order to get his desired $1,000,000?

2.     Assume that Serena Williams desires to accumulate $1 million in 15 years using her money market fund balance of $182,696. At what interest rate must Serena's investment compound annually?

 

E23-11      (SCF-Indirect Method) Condensed financial data of Pat Metheny Company for 2008 and 2007 are presented.

PAT METHENY COMPANY

COMPARATIVE BALANCE SHEET

AS OF DECEMBER 31, 2008 AND 2007

 

 

2008

2007

Cash

$1,800 

$1,150 

Receivables

1,750 

1,300 

Inventory

1,600 

1,900 

Plant assets

1,900 

1,700 

Accumulated depreciation

(1,200)

(1,170)

Long-term investments (Held-to-maturity)

1,300 

1,420 

 

$7,150 

$6,300 

Accounts payable

$1,200 

$  900 

Accrued liabilities

200 

250 

Bonds payable

1,400 

1,550 

Capital stock

1,900 

1,700 

Retained earnings

2,450 

1,900 

 

$7,150 

$6,300 

     

 

PAT METHENY COMPANY

INCOME STATEMENT

FOR THE YEAR ENDED DECEMBER 31, 2008

 

Sales

$6,900

Cost of goods sold

4,700

Gross margin

2,200

Selling and administrative expense

930

Income from operations

1,270

Other revenues and gains

 

Gain on sale of investments

80

Income before tax

1,350

Income tax expense

540

Net income

810

Cash dividends

260

Income retained in business

$  550

   

 

Additional information: During the year, $70 of common stock was issued in exchange for plant assets. No plant assets were sold in 2008.

                       Instructions

                       Prepare a statement of cash flows using the indirect method.

                E23-12           (SCF-Direct Method) Data for Pat Metheny Company are presented in E23-11

                Instructions

                Prepare a statement of cash flows using the direct method. (Do not prepare a reconciliation schedule.)

 P23-7             (SCF-Direct and Indirect Methods from Comparative Financial Statements) George Winston Company, a major retailer of bicycles and accessories, operates several stores and is a publicly traded company. The comparative statement of financial position and income statement for Winston as of May 31, 2008, are shown on the next page. The company is preparing its statement of cash flows.

 

GEORGE WINSTON COMPANY

COMPARATIVE STATEMENT OF FINANCIAL POSITION

AS OF MAY 31

 

 

2008

2007

Current assets

 

 

Cash

$ 33,250

$ 20,000

Accounts receivable

80,000

58,000

Merchandise inventory

210,000

250,000

Prepaid expenses

9,000

7,000

Total current assets

332,250

335,000

 

Plant assets

 

 

Plant assets

600,000

502,000

Less: Accumulated depreciation

150,000

125,000

Net plant assets

450,000

377,000

Total assets

$782,250

$712,000

 

Current liabilities

 

 

Accounts payable

$123,000

$115,000

Salaries payable

47,250

72,000

Interest payable

27,000

25,000

Total current liabilities

197,250

212,000

 

Long-term debt

 

 

Bonds payable

70,000

100,000

Total liabilities

267,250

312,000

Shareholders' equity

 

 

Common stock, $10 par

370,000

280,000

Retained earnings

145,000

120,000

Total shareholders' equity

515,000

400,000

Total liabilities and shareholders' equity

$782,250

$712,000

     

 

GEORGE WINSTON COMPANY

INCOME STATEMENT

FOR THE YEAR ENDED MAY 31, 2008

 

Sales

$1,255,250

Cost of merchandise sold

722,000

Gross profit

533,250

Expenses

 

Salary expense

252,100

Interest expense

75,000

Other expenses

8,150

Depreciation expense

25,000

Total expenses

360,250

Operating income

173,000

Income tax expense

43,000

Net income

$ 130,000

   

 

The following is additional information concerning Winston's transactions during the year ended May 31, 2008.

1.       All sales during the year were made on account.

2.     All merchandise was purchased on account, comprising the total accounts payable account.

3.      Plant assets costing $98,000 were purchased by paying $48,000 in cash and issuing 5,000 shares of stock.

4.     The "other expenses" are related to prepaid items.

5.     All income taxes incurred during the year were paid during the year.

6.     In order to supplement its cash, Winston issued 4,000 shares of common stock at par value.

7.     There were no penalties assessed for the retirement of bonds.

8.     Cash dividends of $105,000 were declared and paid at the end of the fiscal year.

Instructions

a.                 Compare and contrast the direct method and the indirect method for reporting cash flows from operating activities.

b.                 Prepare a statement of cash flows for Winston Company for the year ended May 31, 2008, using the direct                   method. Be sure to support the statement with appropriate calculations. (A reconciliation of net income to net cash provided is not required.)

Reference no: EM13848773

Questions Cloud

Calculates payment necessary to accumulate a future amount : Calculates the payment necessary to accumulate a future amount
Detail the characteristics the lead : Projects in the News REFLECT on the APA Exposed Tutorial in the Lecture Folder for this week. Review any newspaper article, periodical, or journal - printed oronlinethat has been published within the last three (3) months that is project-related.
Demolished at a gas processing plant : Question 1: An old cooling tower is being demolished at a gas processing plant. Which of the following statements would be FALSE?
Identify three of the bundle of rights that davis states : Davis: Identify three of the bundle of rights that Davis states are the same for shared equity homeowners as for any individual homeowner.
Computation of present value : (Computation of Present Value) Using the appropriate interest table, compute the present values of the following periodic amounts due at the end of the designated periods.
What is the maximum initial cost the company : What is the maximum initial cost the company would be willing to pay for the project? (Enter your answer in dollars, not millions of dollars, i.e. 1,234,567. Do not round intermediate calculations and round your final answer to the nearest whole doll..
How much gain or loss should be recognize on bond retirement : PWI retired all of these bonds on January 1, 2016, at 102. Unamortized bond premium on that date was $183,600. How much gain or loss should be recognized on this bond retirement?
What is the force constance k : Where r is the distance between the two atoms and A,R and S positive constants with S
A typical cell has a membrane potential of -70 mv : A typical cell has a membrane potential of -70 mV, meaning that the potential inside the cell is 70 mV less than the potential outside due to a layer of negative charge on the inner surface of the cell wall and a layer of positive charge on the outer..

Reviews

Write a Review

 

Finance Basics Questions & Answers

  Fortunately your attention in f300 resulted in your being

remember that trip to tokyo for the 2020 olympics? lets assume i planned things out way too conservatively. in seven

  Question regarding the effective performance appraisals

Write a paper describing how effective performance appraisals can increase employee performance. This paper should include sections on the strategic advantages of performance appraisals, potential forms of bias within the appraisal system, as well..

  Explain the similarities and differences between project

what are the similarities and differences between project valuation and firm valuation. for example using dcf model by

  What is the present value of your interest

A family trust will convey property to you in 15 years. If the property is expected to be worth 50,000 when you receive it, what is the present value of your interest, discounted at 10 percent annually?

  Should the firm initiate the lockbox system

Assume that the firm could earn 10% on marketable securities and that there are 260 working days and hence 260 transfer from each lockbox location per year.

  Calculate the nav for the following illustration market

calculate the nav for the following illustrationname of the scheme ab balancedsize of the scheme rs 200 croreface

  What is the valuation of the bond if the market interest

you need to present to your client alice cartwright some investment options for her to choose from. her choices are

  How much should be invested in each type of investment

How much should be invested in each type of investment in order to maximize the return? What is the maximum return in the first year? Please show work.

  What is the value v of the unlevered firm note that vu is

companies u and l are identical in every respect except that u is unlevered while l has 10 million of 5 bonds

  Ebay has never been profitable

eBay has never been profitable

  Find the net proceeds from the sale of each bond

Flotation costs of $30 per bond will be incurred in the process (which implies that f = 2.97%, or 0.0297 in decimal form) and the firm is in a 40% tax bracket.

  Calculate christie cash conversion cycle

suppose Christie's managers believe the annual inventory turnover can be raised to 9 times without affecting sales. What would Christie's cash conversion cycle, total assets turnover, and ROA have been if the inventory turnover had been 9 for the ..

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd