Question 1

The company's credit-adjusted risk-free rate of interest is used when computing present value applying the expected cash flow approach.

Accepted Answer

A) True 
 B)False

Question 2

Use the following to answer questions 
Present and future value tables of $1 at 3% are presented below:
  
-Shane wants to invest money in a 6% CD account that compounds semiannually.Shane would like the account to have a balance of $100,000 four years from now.How much must Shane deposit to accomplish his goal?

Accepted Answer

A) $88,849. 
B) $78,941. 
C) $25,336. 
D) $22,510. 
A) $88,849. 
B) $78,941. 
C) $25,336. 
D) $22,510.

Question 3

Prepare a time diagram for the future value of an annuity due with three payments of $400.Be sure to indicate the periods in which interest is added.

Accepted Answer

TIME DIAGRAM FOR THE

Question 4

Use the following to answer questions 
Present and future value tables of $1 at 3% are presented below:
  
-A firm leases equipment under a capital lease (analogous to an installment purchase)that calls for 12 semiannual payments of $39,014.40.The first payment is due at the inception of the lease.The annual rate on the lease is 6%.What is the value of the leased asset at inception of the lease?

Accepted Answer

A) $388,349. 
B) $400,000. 
C) $454,128. 
D) $440,082. 
A) $388,349. 
B) $400,000. 
C) $454,128. 
D) $440,082.

Question 5

JKL Company will issue $2,000,000 in 12%,10-year bonds when the market rate of interest is 10%.Interest is paid semiannually.
Required: Determine how much cash JKL Company should realize from the bond issue.

Accepted Answer

$2,000,000

Question 6

Sandra won $5,000,000 in the state lottery,which she has elected to receive at the end of each month over the next 30 years.She will receive 7% interest on unpaid amounts.To determine the amount of her monthly check,she should use a table for the:

Accepted Answer

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

Question 7

Listed below are 5 terms followed by a list of phrases that describe or characterize each of the terms.Match each phrase with the number for the correct term.

Accepted Answer

The answer of Listed below are 5 terms followed by...

Question 8

Use the following to answer questions 
Present and future value tables of $1 at 3% are presented below:
  
-Jimmy has $255,906 accumulated in a 401K plan.The fund is earning a low,but safe,3% per year.The withdrawals will take place at the end of each year starting a year from now.How soon will the fund be exhausted if Jimmy withdraws $30,000 each year?

Accepted Answer

A) 11 years. 
B) 10 years. 
C) 8.5 years. 
D) 8.8 years. 
A) 11 years. 
B) 10 years. 
C) 8.5 years. 
D) 8.8 years.

Question 9

Monetary assets include only cash and cash equivalents.

Accepted Answer

A) True 
 B)False

Question 10

Koko Company pays $10 million at the beginning of each year for 10 years to Mocha Inc.for a building with a fair value of $75 million.What interest rate is Mocha earning on financing this land sale?

Accepted Answer

A) Between 13% and 14%. 
B) Between 7% and 8%. 
C) Between 5.5% and 6%. 
D) Cannot be determined from the given information. 
A) Between 13% and 14%. 
B) Between 7% and 8%. 
C) Between 5.5% and 6%. 
D) Cannot be determined from the given information.

Question 11

An annuity consists of level principal payments plus interest on the unpaid balance.

Accepted Answer

A) True 
 B)False

Question 12

Use the following to answer questions 
Present and future value tables of $1 at 3% are presented below:
  
-Bill wants to give Maria a $500,000 gift in seven years.If money is worth 6% compounded semiannually,what is Maria's gift worth today?

Accepted Answer

A) $ 66,110. 
B) $ 81,309. 
C) $406,545. 
D) $330,560. 
A) $ 66,110. 
B) $ 81,309. 
C) $406,545. 
D) $330,560.

Question 13

Mary Alice just won the lottery and is trying to decide between the annual cash flow payment option of $250,000 per year for 25 years beginning today and the lump-sum option.Mary Alice can earn 6% investing this money.At what lump-sum payment amount would she be indifferent between the two alternatives?

Accepted Answer

A) $6,250,000. 
B) $3,195,840. 
C) $3,637,590. 
D) $3,387,590. 
A) $6,250,000. 
B) $3,195,840. 
C) $3,637,590. 
D) $3,387,590.

Question 14

Loan C has the same principal amount,payment amount,and maturity date as Loan D.However,Loan C is structured as an annuity due,while Loan D is structured as an ordinary annuity.Loan C's interest rate is:

Accepted Answer

A) Higher than Loan D. 
B) Less than Loan D. 
C) The same as Loan D. 
D) Indeterminate compared to Loan D. 
A) Higher than Loan D. 
B) Less than Loan D. 
C) The same as Loan D. 
D) Indeterminate compared to Loan D.

Question 15

Column 6 is an interest table for the:

Accepted Answer

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

Question 16

DON Corp.is contemplating the purchase of a machine that will produce net after-tax cash savings of $20,000 per year for five years.At the end of five years,the machine can be sold to realize after-tax cash flows of $5,000.Interest is 12%.Assume the cash flows occur at the end of each year.
Required: Calculate the total present value of the cash savings.

Accepted Answer

The answer of DON Corp.is contemplating the purchase of a...

Question 17

Reba wishes to know how much would be in her savings account if she deposits a given sum in an account and leaves it there at 6% interest for five years.She should use a table for the:

Accepted Answer

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

Question 18

Briefly describe the difference between simple interest and compound interest.

Accepted Answer

Simple interest is computed on

Question 19

Compute the future value of the following invested amounts at the specified periods and interest rates.

Accepted Answer

a.FV = $20,000 x 2.15892 = $43

Question 20

Use the following to answer questions 
Present and future value tables of $1 at 3% are presented below:
  
-Carol wants to invest money in a 6% CD account that compounds semiannually.Carol would like the account to have a balance of $50,000 five years from now.How much must Carol deposit to accomplish her goal?

Accepted Answer

A) $35,069. 
B) $43,131. 
C) $37,220. 
D) $35,000. 
A) $35,069. 
B) $43,131. 
C) $37,220. 
D) $35,000.

The company's credit-adjusted risk-free rate of interest is used when computing present value applying the expected cash flow approach.

Prepare a time diagram for the future value of an annuity due with three payments of $400.Be sure to indicate the periods in which interest is added.

JKL Company will issue $2,000,000 in 12%,10-year bonds when the market rate of interest is 10%.Interest is paid semiannually. Required: Determine how much cash JKL Company should realize from the bond issue.

Sandra won $5,000,000 in the state lottery,which she has elected to receive at the end of each month over the next 30 years.She will receive 7% interest on unpaid amounts.To determine the amount of her monthly check,she should use a table for the:

Listed below are 5 terms followed by a list of phrases that describe or characterize each of the terms.Match each phrase with the number for the correct term.

Monetary assets include only cash and cash equivalents.

Koko Company pays $10 million at the beginning of each year for 10 years to Mocha Inc.for a building with a fair value of $75 million.What interest rate is Mocha earning on financing this land sale?

An annuity consists of level principal payments plus interest on the unpaid balance.

Use the following to answer questions Present and future value tables of $1 at 3% are presented below: -Bill wants to give Maria a $500,000 gift in seven years.If money is worth 6% compounded semiannually,what is Maria's gift worth today?

Loan C has the same principal amount,payment amount,and maturity date as Loan D.However,Loan C is structured as an annuity due,while Loan D is structured as an ordinary annuity.Loan C's interest rate is:

Column 6 is an interest table for the:

Reba wishes to know how much would be in her savings account if she deposits a given sum in an account and leaves it there at 6% interest for five years.She should use a table for the:

Briefly describe the difference between simple interest and compound interest.

Compute the future value of the following invested amounts at the specified periods and interest rates.

Environment and Theoretical Structure of Financial Accounting

Review of the Accounting Process

The Balance Sheet and Financial Disclosures

The Income Statement, comprehensive Income, and the Statement of Cash Flows

Income Measurement

Cash and Receivables

Inventories: Measurement

Inventories: Additional Issues

Property, plant, and Equipment and Intangible Assets: Acquisition and Disposition

Property, plant, and Equipment and Intangible Assets: Utilization and Impairment

Investments

Current Liabilities and Contingencies

Bonds and Long-Term Notes

Leases

Accounting for Income Taxes

Pensions and Other Postretirement Benefits

Shareholders Equity

Share-Based Compensation and Earnings Per Share

Accounting Changes

The Statement of Cash Flows

Filters

Exam 6: Time Value of Money Concepts

The company's credit-adjusted risk-free rate of interest is used when computing present value applying the expected cash flow approach.

Prepare a time diagram for the future value of an annuity due with three payments of $400.Be sure to indicate the periods in which interest is added.

JKL Company will issue $2,000,000 in 12%,10-year bonds when the market rate of interest is 10%.Interest is paid semiannually. Required: Determine how much cash JKL Company should realize from the bond issue.

Sandra won $5,000,000 in the state lottery,which she has elected to receive at the end of each month over the next 30 years.She will receive 7% interest on unpaid amounts.To determine the amount of her monthly check,she should use a table for the:

Listed below are 5 terms followed by a list of phrases that describe or characterize each of the terms.Match each phrase with the number for the correct term.

Monetary assets include only cash and cash equivalents.

Koko Company pays $10 million at the beginning of each year for 10 years to Mocha Inc.for a building with a fair value of $75 million.What interest rate is Mocha earning on financing this land sale?

An annuity consists of level principal payments plus interest on the unpaid balance.

Use the following to answer questions Present and future value tables of $1 at 3% are presented below: -Bill wants to give Maria a $500,000 gift in seven years.If money is worth 6% compounded semiannually,what is Maria's gift worth today?

Loan C has the same principal amount,payment amount,and maturity date as Loan D.However,Loan C is structured as an annuity due,while Loan D is structured as an ordinary annuity.Loan C's interest rate is:

Column 6 is an interest table for the:

Reba wishes to know how much would be in her savings account if she deposits a given sum in an account and leaves it there at 6% interest for five years.She should use a table for the:

Briefly describe the difference between simple interest and compound interest.

Compute the future value of the following invested amounts at the specified periods and interest rates.

Environment and Theoretical Structure of Financial Accounting

Review of the Accounting Process

The Balance Sheet and Financial Disclosures

The Income Statement, comprehensive Income, and the Statement of Cash Flows

Income Measurement

Cash and Receivables

Inventories: Measurement

Inventories: Additional Issues

Property, plant, and Equipment and Intangible Assets: Acquisition and Disposition

Property, plant, and Equipment and Intangible Assets: Utilization and Impairment

Investments

Current Liabilities and Contingencies

Bonds and Long-Term Notes

Leases

Accounting for Income Taxes

Pensions and Other Postretirement Benefits

Shareholders Equity

Share-Based Compensation and Earnings Per Share

Accounting Changes

The Statement of Cash Flows

Filters