Prepare the Statement of Retained Earnings from the Adjusted Trial Balance and Income Statement. Within each section of the statement,
SMART TOUCH LEARNING
Adjusted Trial Balance
December 31, 2016
Account Title
Debit Credit
Cash 19500
Accounts recievable 10800
Office Supplies 200
Prepaid Rent 13,000
Furniture 22,800
Accumulated Depreciation--Furniture 7800
Accounts Payable 2600
Salaries Payable 600
Interest Payable 300
Unearned Revenue 6,500
Notes Payable 9,100
Common Stock 12,700
Retained Earnings 13,000
Dividends 33,100
Service Revenue 59,100
Depreciation Expense-Furniture 2600
Interest Expense 300
Rent Expense 3900
Salaries Expense 4500
Supplies Expense 1000
Total 111,700 111,700
SMART TOUCH LEARNING
Income Statement
Month Ended December 31, 2016 Balance
Revenue
Service revenue 59100
ExpensesDepreciation Expense-Furniture 2600
Interest Expense 300
Rent Expense 3900
Salaries Expense 4500
Supplies Expense 1000
Total expense 12300
Net income 46800

Answers

Answer 1

Answer:

Retained earnings, December 31, 2016 = 26,700

Explanation:

The Statement of Retained Earnings can be prepared as follows:

                     SMART TOUCH LEARNING

                Statement of Retained Earnings

         For the month ended December 31, 2016

Details                                                                     Amount  

Retained earnings, December 01, 2016                 13,000

Net income for the month                                      46,800

Dividends                                                               (33,100)  

Retained earnings, December 31, 2016              26,700  

Note: No currency sign is used in the answer in order to avoid confusion because no currency is used in the question itself.


Related Questions

The Best Company is reviewing two options for replacing a piece of machinery. The first machine costs $100,230 and has a four-year life. The second machine costs $155,000 and has a six-year life. Neither machine will have a salvage value. The machines will be replaced at the end of their life. What method should be used to determine which machine to purchase?

Answers

Answer:

Equivalent annual cost method

Explanation:

Equivalent annual cost method is a method used to choose between two projects with an unequal life span

The decision rule is to choose the product with the higher Equivalent annual cost

Equivalent annual cost method is better for making this decision because if net present value is used, the project with the higher useful life would be chosen. this does not mean it is more profitable

Which of the following methods of accounting for investments is appropriate when the investor has significant influence over the investee?
a. cost method.
b. mark to market method.
c. equity method.
d. lower of cost or market method.

Answers

Answer:

The answer is "Option c".

Explanation:

The equity method is indeed the conventional technique used whenever an investor, a firm, has a massive effect on some other asset manager.

It is the method used by a company to document its money generated through investment in another company.

The investor should record its profits or losses following its ownership percentage. It regularly changes the value of the property to a balance sheet of even an investor.

What is the beta for a 2 stock portfolio with a 0.43 weight in Walmart stock and the remainder in Amazon

Answers

Answer: 0.82

Explanation:

From the given formulas, the beta of Walmart is 0.3616 and the beta of Amazon is 1.1634.

The portfolio beta is going to be a weighted average of these two betas:

= (0.43 * 0.3616) + ( (1 - 0.43) * 1.1634)

= 0.155488 + 0.663138

= 0.82

What is the present value of a perpetuity that offers to pay $100 next year and every year after the payment grows at 4.3%. Investments with similar risk are offering an 8% annual return.

Answers

Answer:

PV= $2,702.70

Explanation:

Giving the following information:

Cash flow= $100

Growth rate (g)= 4.3%

Discount rate (i)= 8%

To calculate the present value of the perpetuity, we need to use the following formula:

PV= Cf / (i - g)

PV= 100 / (0.08 - 0.043)

PV= 100 / 0.037

PV= $2,702.70

Mr. J's Bagels invested in a new oven for $14,000. The oven reduced the amount of time for baking which increased production and sales for five years by the following amounts of cash inflows:
Year 1: $8,000
Year 2: $6,000
Year 3: $5,000
Year 4: $6,000
Year 5: $5,000
The payback period for the investment in the oven would be:
a: 5 years
b: 2.3 years
c: 2.0 years
d: 0.5 years

Answers

Answer:

c: 2.0 years

Explanation:

The computation of the payback period is shown below:

Since initial investment is $14,000

And, if we add the first two cash inflows i.e.

= $8,000 + $6,000

= $14,000

So, it is equivalent to the initial investment made

So, this means the investment amount payback in 2 years

Therefore the option c is correct

SmartCorp sells 500 units, resulting in $75,000 of sales revenue, $32,000 of variable costs, and $20,000 of fixed costs. The number of units that must be sold to achieve $41,000 of operating income is: (Round intermediary calculations to two decimal places, and your final answer up to the nearest whole number.)

Answers

Answer: 709

Explanation:

selling price per unit will be:

= $75000/500

= $150

Variable cost per unit:

= $32000/500

= $64

Contribution margin per unit = $150 - $64 = $86

Number of units to be sold will now be:

= ($20000 + $41000) / $86

= $61000/$86

= 709

Rudy's and Blackstone are all-equity firms. Rudy's has 1,200 shares outstanding at a market price of $36 a share. Blackstone has 2,500 shares outstanding at a price of $38 a share. Blackstone is acquiring Rudy's for $48,000 in cash. What is the merger premium per share

Answers

Answer:

$4

Explanation:

Calculation to determine the merger premium per share

Using this formula

Merger premium per share=(Cash/Shares outstanding)-Market price

Let plug in the formula

Merger premium per share = ($48,000 / 1,200) - $36

Merger premium per share=$40-$36

Merger premium per share=$4

Therefore the merger premium per share is $4

A natural monopoly arises whenA. a single firm aggressively forces other competitors to exit and industry.B. a single firm has a monopoly over natural resources.C. two firms merge into a single firm in order to capture more of the market.D. a single firm can produce more cheaply than multiple firms due to a downward-sloping average total cost curve.

Answers

Answer:

D

Explanation:

A monopoly is when there is only one firm operating in an industry. there are usually high barriers to entry of firms. the demand curve is downward sloping. it sets the price for its goods and services.

An example of a monopoly is a utility company

A natural monopoly occurs due to the high start-up costs or a large economies of scale.

Natural monopolies are usually the only company providing a service in a particular region  

Characteristics of natural monopolies

they have a large fixed cost The firms have a low marginal costThey occur naturally through the free market. It does not occur by government regulation or any other force

K Company estimates that overhead costs...
K Company estimates that overhead costs for the next year will be $3,700,000 for indirect labor and $890,000 for factory utilities. The company uses direct labor hours as its overhead allocation base. Of 125,000 direct labor hours are planned for this next year, what is the company's plantwide overhead rate?
a. $0.03 per direct labor hour
b. $36.72 per direct labor hour.
c. $2960 per direct labor hour
d. $712 per direct labor hour
e. $0.14 per direct labor hour

Answers

Answer:

Predetermined manufacturing overhead rate= $36.72 per direct labor hour

Explanation:

To calculate the predetermined manufacturing overhead rate we need to use the following formula:

Predetermined manufacturing overhead rate= total estimated overhead costs for the period/ total amount of allocation base

Predetermined manufacturing overhead rate= (3,700,000 + 890,000) / 125,000

Predetermined manufacturing overhead rate= 4,590,000 / 125,000

Predetermined manufacturing overhead rate= $36.72 per direct labor hour

You are the manager of a local sporting goods store and recently purchased ashipment of 60 sets of skis and ski bindings at a total cost of $30,000 (yourwholesale supplier would not let you purchase the skis and bindings separately,nor would it let you purchase fewer than 60 sets). The community in whichyour store is located consists of many different types of skiers, ranging fromadvanced to beginners. From experience, you know that different skiers valueskis and bindings differently. However, you cannot profitably price discrimi-nate because you cannot prevent resale. There are about 20 advanced skierswho value skis at $350 and ski bindings at $250; 20 intermediate skiers whovalue skis at $250 and ski bindings at $375; and 20 beginning skiers who valueskis at $175 and ski bindings at $325. Determine your optimal pricing strateg

Answers

Answer:

Optimal price is $575 which includes skis and ski binding.

Explanation:

Skiers who value skis at

Advance 20 * [$350 + $250] = $12,000

Intermediate 20 * [$250 + $375] = $12,500

beginners 20 * [$175 + $325] = $10,000

Total Revenue $34,500

Optimal price $34,500 / 60 = $575.

A bond has a yield to maturity (YTM) of 9.00%. If the YTM decreases to 8.90%, then the price of the bond will_____.

Answers

Answer:

increase

Explanation:

Spanolia LLC is estimating its WACC. Its bonds have a 12 percent coupon, paid semiannually, a current maturity of 20 years, and sell for 1,000 USD. The firm's marginal tax rate is 40 percent. What is the after-tax cost of debt? Answer in % terms to 2 decimal places w/o the % sign.

Answers

Answer:

Spanolia LLC

The after-tax cost of debt is:

= 7.20%.

Explanation:

a) Data and Calculations:

Coupon interest rate of bonds = 12%

Maturity period = 20 years

Selling price = $1,000

Firm's marginal tax rate = 40%

After-tax cost of debt = Coupon interest rate * (1 - tax rate)

= 12% * (1 - 0.4)

= 12% * 0.6

= 7.20%

b) Spanolia's after-tax cost of debt is derived by multiplying the cost of debt by the after-tax rate.  The after-tax cost of debt represents the interest that Spanolia LLC pays on the bonds less the income tax savings that it gains because interest expenses are tax-deductible.

Daphne has received job offers in six different cities across the United States. The table below shows the nominal wage she is being offered in each city and the average monthly rent for an apartment in each city. a. Calculate Daphne’s real wage in terms of how many months of rent her wage could purchase in each city and complete the “Real Wage” column in the table below.

Answers

https://study.com/academy/answer/daphne-has-received-job-offers-in-six-different-cities-across-the-united-states-the-table-below-shows-the-nominal-wage-she-is-being-offered-in-each-city-and-the-average-monthly-rent-for-an-apartment.html

The short-run elasticity of demand for gasoline sold at gasoline stations is 0.20. If terrorism causes the supply of gasoline to fall, resulting in a 5 percent drop in quantity, if other things remain the same, the price per gallon will increase by:___________

Answers

Answer:

25%

Explanation:

Price elasticity of supply measures the responsiveness of quantity supplied to changes in price of the good.

Price elasticity of supply = percentage change in quantity supplied / percentage change in price

0.2 =5% / percentage change in price

percentage change in price = 5/0.2 = 25%

If the absolute value of price elasticity is greater than one, it means supply is elastic. Elastic supply means that quantity supplied is sensitive to price changes.  

Supply is inelastic if a small change in price has little or no effect on quantity supplied. The absolute value of elasticity would be less than one

Supply is unit elastic if a small change in price has an equal and proportionate effect on quantity supplied.  

According to the National Association of Colleges and Employers, finance graduates make an average of (µ) $52,402 a year. The standard deviation of annual salaries of finance graduates is (σ) $7,000. A random sample of 100 accounting graduates show that the sample mean salary is $54,390.If we were to increase the sample size (n) from 100 to 144, the z score will:A) increase.B) decrease.C) stay the same.D) be zero.

Answers

Answer:

National Association of Colleges and Employers

Therefore, if we were to increase the sample size (n) from 100 to 144, the z score will:

A) increase.

Explanation:

a) Data:

Mean (average) (µ) annual earnings of finance graduates = $52,402

Standard deviation of annual salaries of finance graduates (σ) = $7,000

Sample size of accounting graduates (n) = 100

Sample mean salary = $54,390

If sample size were increased to 144, from 100, what happens to the z score will be:

Calculating z score:

z = (x-μ)/σ

= (54,390 - 52,402)/7,000

= 0.284

Example:

= (58,000 - 52,402)/7,000

= 0.8

b) In statistics, as the sample size is increased from 100 to 144, the sample mean, x, ($54,390) and standard deviation ($7,000) will be closer in value to the population mean, μ, ($52,402) and standard deviation, σ.

When the United States sends money to Japan to help earthquake survivors, in which account is this transaction recorded

Answers

Answer:

When the United States sends money to Japan to help earthquake survivors, in which account is this transaction recorded? o credit item in that country's balance of payments.

Arisk-neutral consumer is deciding whether to purchase a homogeneousproduct from one of two firms. One firm produces an unreliable product andthe other a reliable product. At the time of the sale, the consumer is unable todistinguish between the two firmsîproducts. From the consumerîs perspec-tive, there is an equal chance that a given firmîs product is reliable or unreli-able. The maximum amount this consumer will pay for an unreliable productis $0, while she will pay $50 for a reliable product.
a. Given this uncertainty, what is the most this consumer will pay to purchaseone unit of this product?
b. How much will this consumer be willing to pay for the product if the firmoffering the reliable product includes a warranty that will protect the con-sumer? Explain

Answers

Answer:

Uncertainty over Reliable and Unreliable Product

a. Given this uncertainty, the most this consumer will pay to purchase one unit of this product is $25

b. The amount that this consumer will be willing to pay for the product if the firm offering the reliable product includes a warranty that will protect the consumer is $50.

c. This is because the stated maximum amount that the consumer is willing to pay for the reliable product is $50.  She is not prepared to spend more than this amount on the reliable product.

Explanation:

a) Data and Calculations:

                                                                    Unreliable     Reliable

Maximum amount the consumer will pay      $0              $50

Probability of reliability                                    0.5              0.5

Expected amount to pay for either product  $0              $25 ($50 * 0.5)

a. Given this uncertainty, the most this consumer will pay to purchase one unit of this product is $25 ($0 + $25)

Below is financial information for two sporting goods retailers. Extreme Sports Company operates a retail business and franchising business. At the end 2011, Extreme Sports had 263 Company-owned and 120 franchise-operated retail stores. Extreme's stores are located in suburban, strip mall and regional mall locations, the company operates in 32 states. All Sports Corporation sells sporting goods and related products at over 2,500 Company-operated retail stores.
Selected Data for All Sports and Extreme Sports (amounts in millions):
All Sports Extreme Sports
Sales $5,320 $1,344
Cost of Goods Sold 3,897 887
Interest Expense 138 43
Net Income 212 33
Average Accounts Receivable 114 18
Average Inventory 998 286
Average Fixed Assets 1,163 130
Average Total Assets 2,472 662
Average Tax Rate 40% 40%
Calculate the following ratios for All Sports and Extreme Sports: If required, round your answers to two decimal places.
Find the following for each: All Sports / Extreme Sports
a. Return on assets
b. Profit Margin for ROA
c. Assets turnover
d. Accounts receivable turnover
e. Inventory turnover
f. Fixed asset turnover

Answers

Answer:

All Sports Company and Extreme Sports Company

                                          All Sports                   Extreme Sports

a. Return on assets (ROA) = Profit margin * Assets turnover

=                                       3.98%*2.15                2.46%*2.03

=                                       8.56%                         4.99%

b. Profit Margin for ROA = Net income/Sales

=                                      ($212/5,320 * 100)     ($33/1,344 * 100)

=                                        3.98%                          2.46%

c. Assets turnover = Sales/Total assets

=                                       $5,320/$2,472          $1,344/$662

=                                       2.15                              2.03

d. Accounts receivable turnover = Credit Sales/Average receivable

=                                       $5,320/$114             $1,344/$18

=                                        46.67x                        74.67x

e. Inventory turnover = Cost of goods sold/Average Inventory

=                                       $3,897/$998            $887/$286

=                                       3.9x                            3.10x

f. Fixed asset turnover = Sales/Fixed assets

=                                       $5,320/$1,163         $1,344/$130

=                                       4.57x                        1.03x

Explanation:

a) Data and Calculations:

                                             All Sports     Extreme Sports

Sales                                        $5,320             $1,344

Cost of Goods Sold                   3,897                  887

Interest Expense                          138                     43

Net Income                                   212                    33

Average Accounts Receivable     114                     18

Average Inventory                      998                  286

Average Fixed Assets               1,163                   130

Average Total Assets              2,472                  662

Average Tax Rate                      40%                  40%

Curtis purchased stock with an initial share price of $140, and sold it when the share price was $119. While he owned the stock, he earned $10 in dividends.

What was his total percentage return on the investment?


-17.65%

-15.00%

-9.24%

-7.86%

Answers

Answer:

Curtis

The total percentage return on the investment is:

= -7.86%.

Explanation:

a) Data and Calculations:

Initial share price at which the stock was purchased = $140

The selling share price = $119

Dividends earned during the stock ownership (holding period) = $10

Total returns, including proceeds from the sales = $129 ($119 + $10)

Total returns from holding the stock until sold

= Total returns + sales proceeds minus Initial purchase cost

= -$11 ($129 - $140)

Total percentage return on the investment = $11/$140 * 100

= 7.857

= 7.86%

John believes his sales team's performance is due to outside forces, like economic and market factors. Which of the following best describes is John's locus of control?

a. External
b. Market driven
c. Internal
d. Based on labor trends.

Answers

Answer:

a. External

Explanation:

There are only two types of locus of control and these are internal and external. In this scenario, John's locus of control would be external. This is because John is connecting various external forces that he cannot control, to the performance of the sales team. This indicates an external locus of control. If John where to instead attribute something such as hard work and training to his sales team's perfomance, then that would be considered an internal locus of control.

Jamie is single. In 2020, she reported $108,000 of taxable income, including a long-term capital gain of $5,800. What is her gross tax liability

Answers

Answer:Jamie's gross tax liability is $19,572.50

Explanation:

Since Jamie is single with taxable income of $108,000 which  includes $5,800 long term capital gain.

Therefore  $102,200 (108,000 -5,800) will be taxed under normal tax rates and $5,800 would be under long term capital gain tax rate.

With regards the 2020 tax schedule,  Since her ordinary income is  $102,200, Jamie falls under 24% rate tax bracket under filing for single status.

qd

Tax liability on ordinary income =$14,382.50 plus 24% of any income you made above $84,200

14,382.50 + 0.24 (102,200 - 84,200)

14,382.50 + 0.24 x 18000

                 = 14,382.50 + 4,320

                 = $18,702.50

Also, according to her income, longterm capital gain tax applicable in 2020 is 15%

Tax on long term capital gain = 5,800 × 0.15

                                              = $870

Jamie's gross tax liability is $18,702.50 + 870 = $19,572.50

The expected average rate of return for a proposed investment of $4,250,000 in a fixed asset, using straight-line depreciation, with a useful life of 20 years, no residual value, and an expected total net income of $8,500,000 over the 20 years is:_________ (round to two decimal points).
a. 10.00%
b. 20.00%
c. 40.00%
d. 1.00%

Answers

Answer:

A

Explanation:

Average rate of return is a capital budgeting method. It is used to determine if a firm should invest in a project or should not invest in a project

average rate of return = average net income / average cost of investment

average net income = (total net income - depreciation) / useful life

(8,500,000 - $4,250,000) / 20 = 212,500

Average cost of investment =( beginning book value of the investment - ending book value of the investment) / 2

($4,250,000 - 0) / 2 = 2,125,000

ARR = 212,500 / 2125,000 = 0.1  = 10%

Last year, a Walmart store in Nebraska had annual sales of $11,390,000, with an average dollar stock amount for the year of $2,149,000. What was the stock turnover for the year at the store in Nebraska? How would the store manager determine if this was a "good" rate of turnover?

Answers

Answer:

See below

Explanation:

1. With regards to the information above, stock turnover is computed as cost of goods sold divided by average stock.

Stock turnover = Cost of goods sold / Average stock

Cost of goods sold/Cost of sales = $11,390,000

Average stock = $2,149,000

Then,

Stock turnover = $11,390,000 / $2,149,000

Stock turnover = 5.30 times

Therefore, the stock turnover for the year at the store in Nebraska is 5.30 times

2. The store manager would determine if it was a good rate of turnover if it increases compare to previous stock turnover. Rate of turnover shows the rate or number of times at which a company can sell and replace its stock of goods within a year.

Agreement and disagreement among economists
Suppose that Raphael, an economist from an AM talk radio program, and Susan, an economist from a nonprofit organization on the West Coast, are arguing over saving incentives. The following dialogue shows an excerpt from their debate:
Yvette: I think it's safe to say that, in general, the savings rate of households in today's economy is much lower than it really needs to be to sustain the improvement of living standards.
Sean: I think a switch from the income tax to a consumption tax would bring growth in living standards.
Yvette: You really think households would change their saving behavior enough in response to this to make a difference? Because I don't.
1. The disagreement between these economists is most likely due to (differences in values, differences in perception versus reality, differences in scientific judgments) .
2. Despite their differences, with which proposition are two economists chosen at random most likely to agree?
A. Lawyers make up an excessive percentage of elected officials.
B. Minimum wage laws do more to harm low-skilled workers than help them.
C. Tariffs and import quotas generally reduce economic welfare.

Answers

Answer:

Differences in values C. Tariffs and import quotas generally reduce economic welfare.

Explanation:

Yvette and Sean most likely have a difference in values because they believe that one thing is better for the economy than the other. This means that when it comes down to the economy, they value a certain approach over other approaches.

Economist don't usually find common ground on many things but there are some things where they have a general consensus and one of them is that tariffs and import quotas are bad for the economy. They believe that people stand more to gain from free trade than restricted trade.

The country of Arcadia has clusters of associated businesses and suppliers which include individual dye and textile manufacturing firms, chemical plants, and leather manufacturing companies, most of which are well reputed and internationally competitive. This has made Arcadia a major force in the global economic market. Which of the following factors of Michael Porter's diamond model is responsible for giving Arcadia an edge over its competitors?
A) Related and supporting industries
B) Demand conditions
C) Company strategy, structure and rivalry
D) Factor conditions

Answers

Answer:

A) Related and supporting industries

Explanation:

Competitive advantage is the edge an entity has over others that results in higher profit margins.

According to Michael Porter there are 4 factors that gives national advantage in the international environment:

- firm strategy' structure and rivalry

- related supporting industries

- demand conditions

- factor conditions.

Related supporting industries refers to the presence of supporting industries that helps a company to thrive.

Forms depend on others for high productivity. When the presence of other supporting companies is adequate production will be maximised.

This is the case in the given instance where the country of Arcadia has clusters of associated businesses and suppliers which include individual dye and textile manufacturing firms, chemical plants, and leather manufacturing companies, most of which are well reputed and internationally competitive. This has made Arcadia a major force in the global economic market

On the balance sheet, total assets minus net fixed assets equals:________.
a. current assets
b. current liabilities
c. gross fixed assets
d. total assets

Answers

Answer:

Current assets

Explanation:

the Answer is subtracting from total assets so it can’t be d. It also doesn’t include liabilities as your answer is something in the asset category. You are already subtracting fixed assets so it can’t be c. The answer is a. Current assets

Leelanau applies overhead using a predetermined rate. What amount of overhead was applied to work in process last year

Answers

Answer:

$138,500

Explanation:

The computation of the overhead applied is shown below:

As we know that

Cost of goods manufactured = Beginning WIP + Total manufacturing costs - Ending WIP

$323,000 = $10,500 + Total manufacturing costs - $19,000

So,  

Total manufacturing costs is

= ($323,000 + $19,000 - $10,500)

= $331,500

Now  

Total manufacturing costs is

= Direct materials + Direct labor + Overheads

So,  

Overheads is

= ($331,500 - $115,000 - $78,000)

= $138,500

Harry has worked as a general manager at Gringard, a supply chain management firm, for eleven years of his professional life. Gringard is a company that still follows a traditional business model and has not significantly changed its human resource management and talent development processes. Harry is now joining Alivron Inc., a company that focuses on a customer-driven supply chain approach. Which of the following is a change Harry should expect to find in his new company?

a. He should expect Alivron to emphasize strong operational skills rather than cross-functional collaboration skills.
b. He wil most likely need to move from following an agile approach to an analytical approach.
c. He will most likely need to work variable shifts so that he can connect with all his team members.
d. He should expect Alivron's distribution centers to run only two shifts Monday through Friday.

Answers

Answer:

C. He will most likely need to work variable shifts so that he can connect with all his team members.

Explanation:

He will most likely need to work variable shifts so that he can connect with all his team members.

In his new company, he will most likely need to work variable shifts so that he can connect with all his team members.

Variable shifts is called rotating shifts because it is different from the conventional workdays.

The Variable shifts are programmed to schedule the employees to cover 24 hour a day, 7 days per week operations.

Hence, In the new company, he will most likely need to work variable shifts so that he can connect with all his team members.

Therefore, the Option C is correct.

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brainly.com/question/8475207

The spread of ATMs and the increased use of debit cards​ _______ money. Everything else remaining the​ same, the nominal interest rate​ _______.

Answers

Answer:

increase the demand​ for; falls

Explanation:

ATMs means automated teller machine. They increase the ease through which a bank account holder can assess her funds. ATMs can be used to :

withdraw funds check account balancetransfer money

With the proliferation of ATMs and the increased use of debit cards​, there has been an increase in the demand for money. This has led to a fall in nominal interest rate

The demand for money (the decision to hold money) is inversely related to interest rate. If the demand for money increases, it means that less bonds are been held. As a result, there would be a fall in the interest rates.

Project 1 requires an original investment of $125,000. The project will yield cash flows of $50,000 per year for 10 years. Project 2 has a computed net present value of $135,000 over an eight-year life. Project 1 could be sold at the end of eight years for a price of $8,000. (a) Using the present value tables in Exhibits 2 and 5, determine the net present value of Project 1 over an eight-year life, with residual value, assuming

Answers

Answer: $126,613

Explanation:

Net Present value of Project A is:

= Present value of $50,000 annuity + Present value of residual value - Initial investment

Present value of $50,000 annuity:

= 50,000 * ( 1 - ( 1 + rate)^-number of periods) / rate

= 50,000 * ( 1 - ( 1 + 12%) ⁻⁸) / 12%

= $248,382

Present value of residual value:

= 8,000 / ( 1 + 12%)⁸

= $3,231

Net present value

= 248,382 + 3,231 - 125,000

= $126,613

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