Answer:
Instructions are below.
Explanation:
Giving the following information:
Machine A:
Fixed costs= $38,000
Unitary cost= $7
Machine B:
Fixed costs= $31,000
Unitary cost= $11
Revenue per unit= $19
To calculate the break-even point in units, we need to use the following formula:
Break-even point in units= fixed costs/ contribution margin per unit
Machine A:
Break-even point in units= 38,000 / (19 - 7)
Break-even point in units= 3,167
Machine B:
Break-even point in units= 31,000 / (19 - 11)
Break-even point in units= 3,875
Now, we need to determine the indifference point:
Machine A= 38,000 + 7x
Machine B= 31,000 + 11x
x= number of units
We will equal both formulas and isolate x:
38,000 + 7x = 31,000 + 11x
7,000 = 4x
1,750=x
Indifference point= 1,750 units
Finally, the total cost for 10,000 units:
Machine A= 38,000 + 7*10,000= $108,000
Machine B= 31,000 + 11*10,000= $141,000
The Vice-President of ACME Corporation, an NYSE listed firm, places an order to buy 10,000 shares of ACME common at the market. 3 months later, ACME stock's price has increased by 20% and the officer places an order to sell. Which statement is TRUE
Answer: D. The officer must forfeit the profit on the sale
Explanation:
The Vice-president of ACME who is the one attempting to sell is an officer of ACME and as such falls under Rule 144 of the Securities Exchange Act of 1934 as a control person.
This Act is meant to curb market manipulation and so it places restrictions on some activities by officers of a company. One of which is that for the seller to claim any profits on such sales, they would have to had held the stock for at least 6 months so that they do not have a "short swing" profit. If they do so, they are to pay the profits accrued back to the Issuer of the stock so indeed, the officer must forfeit the profit on the sale.
Given a stock index with a value of $1,200, an anticipated dividend of $45, and a risk-free rate of 6%, what should be the value of one futures contract on the index
Answer: $1,227
Explanation:
The value of the futures contract should be calculated by the formula;
= Stock Index Value * ( 1 + risk free rate ) - dividends
= 1,200 * ( 1 + 0.06) - 45
= $1,227
How and When to accomplish all Assistant Manager responsibilities in a shift in a fast food restaurant.
Answer:
Researching new wholesale food suppliers and negotiating prices
Calculating future needs in kitchenware and equipment and placing orders, as needed
Managing and storing vendors’ contracts and invoices
Overseeing restaurant staff performance, ensuring quality dining
Explanation:
Responsibilities
Research new wholesale food suppliers and negotiate prices
Calculate future needs in kitchenware and equipment and place orders, as needed
Manage and store vendors’ contracts and invoices
Coordinate communication between front of the house and back of the house staff
Prepare shift schedules
Process payroll for all restaurant staff
Supervise kitchen and wait staff and provide assistance, as needed
Keep detailed records of daily, weekly and monthly costs and revenues
Arrange for new employees’ proper onboarding (scheduling trainings and ordering uniforms)
Monitor compliance with safety and hygiene regulations
Gather guests’ feedback and recommend improvements to our menus
The transportation model, when applied to location analysis: maximizes revenues. minimizes total fixed costs. minimizes total production and transportation costs. minimizes total transportation costs. minimizes the movement of goods.
Answer:
Correct Answer:
4. minimizes total transportation costs.
Explanation:
When a good transportation method is applied, it helps in minimizing the transportation cost involved in moving goods and services from one location to another. For example, it cost 2 million dollars to transport a particular product. With good transportation model, it would definitely be cheaper.
Journalize the following entries for the month:
a. Materials are purchased to produce 960 units.
b. Conversion costs are applied to 910 units of production.
c. The cell completes 860 units, which are placed into finished goods.
Answer:
Journal Entries without $ amounts:
a. Debit Materials Inventory for 960 units
Credit Cash Account or Accounts Payable for 960 units.
To record the purchase of materials for the production of 960 units
Debit Work in process for 960 units
Credit Materials Inventory for 960 units
To record the transfer of materials to work in process.
b. Debit Conversion Costs for 910 units
Credit Cash Account for 910 units
To record conversion expenses.
Debit Work in process for conversion costs
Credit Conversion Costs
To record the transfer of conversion costs to WIP.
c. Debit Finished Goods Inventory for 860 units
Credit Work in Process for 860 units
To record the transfer of 860 units out of WIP, (materials and conversion costs).
Explanation:
Journals serve multi-purposes for the initial recording of business transactions. They also play important roles for period-end and other adjustments. Journals come in hand for closing entries of transactions. Importantly, they identify the accounts that are debited and credited respectively. There are many kinds of journals for various purposes, from the general to so many of the specialized kinds. We can even use journal entries to record exchange of quantities, not only dollar amounts, as demonstrated above.
11. Garth Corporation sells a single product. If the selling price per unit and the variable expense per unit both increase by 10% and fixed expenses do not change, then: A. profit will go up 10% B. profit will go up more than 10% C. profit will go down by less than 10% D. profit will not change
Answer:
D
Explanation:
Profit = Revenue - cost
Cost = fixed cost + variable cost
if variable cost increases by 10%, cost would increase by 10%.
Revenue also increases by 10%
So, the increase in revenue would be cancelled by the increase in cost and profit would not change
If workers are more productive, the increase may not be reflected on the static budget variance if there were also:__________
A. Greater sales than planned
B. Less sales than planned
C. Greater production than planned
D. Less production than planned
E. None of the above Clear my choice
Answer:
abcde
Explanation:
abcde...................................................
The master budget of Sheffield Corp. shows that the planned activity level for next year is expected to be 50000 machine hours. At this level of activity, the following manufacturing overhead costs are expected: Indirect labor$730000 Machine supplies200000 Indirect materials220000 Depreciation on factory building120000 Total manufacturing overhead $1270000 A flexible budget for a level of activity of 60000 machine hours would show total manufacturing overhead costs of
Answer:
Total overhead= $1,500,000
Explanation:
Giving the following information:
First, we need to separate the variable overhead and the fixed overhead:
Variable overhead:
Indirect labor 730,000
Machine supplies 200,000
Indirect materials 220,000
Total variable overhead= $1,150,000
Fixed overhead:
Depreciation on factory building $120,000
Now, we need to calculate the unitary variable overhead:
unitary variable overhead= 1,150,000/50,000= $23
Finally, the total overhead for 60,000 units:
Total overhead= 23*60,000 + 120,000
Total overhead= $1,500,000
The owners of a landscaping business decide they need insurance to cover their trucks in case of accidents , injuries caused by flying debris from their trimmers and blowers, and property damage caused by falling tree limbs. What type of policy should the owners consider to cover all of these risk?
A business owners policy
Answer:
it is a business owners policy
Explanation:
APEX
Entries for Investments in Bonds, Interest, and Sale of Bonds Kalyagin Investments acquired $220,000 of Jerris Corp., 7% bonds at their face amount on October 1, 20Y2. The bonds pay interest on October 1 and April 1. On April 1, 20Y3, Kalyagin sold $80,000 of Jerris bonds at 103.
Journalize the entries to record the following:
a. The initial acquisition of the Jerris Corp. bonds on October 1, 20Y2.
b. The adjusting entry for three months of accrued interest earned on the Jems Corp. bonds- or December 11, 20Y2.
c. The receipt of semiannual interest on April 1. 20Y3.
d. The sale of 580,000 of Jerris Corp. bonds on April, 20Y3, at 103.
Answer:
a. Investments in Jerris Corp. bonds (Dr.) $220,000
Cash (Cr.) $220,000
b. Interest Receivable (Dr.) $3,850
Interest received (Cr.) $3,850
c. Cash (Dr.) $7700
Interest Received (Cr.) $3,850
Interest Receivable (Cr.) $3,850
d. Cash (Dr.) $80,000
Investment in Jerris Corp. bonds (Cr.) $80,000
Explanation:
Interest received is the amount interest that is accrued on the bond over the period of time.
Interest accrued = Amount of investment * Coupon rate * time proportion
Interest accrued = 220,000 * 7% * 3/12
Interest accrued = $3,850.
Problem 11-5 Sensitivity Analysis and Break-Even [LO1, 3] We are evaluating a project that costs $560,400, has a six-year life, and has no salvage value. Assume that depreciation is straight-line to zero over the life of the project. Sales are projected at 80,000 units per year. Price per unit is $38, variable cost per unit is $24, and fixed costs are $680,000 per year. The tax rate is 22 percent, and we require a return of 10 percent on this project. a-1. Calculate the accounting break-even point. (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.) a-2. What is the degree of operating leverage at the accounting break-even point
Answer:
a-1. $1,845,714.29
a-2 8.2805
Explanation:
a-1 Calculate the accounting break even point.
At break even point, the net income is 0.
Given the data below as extracted from the information above;
Quantity Q = 80,000 units
Price per unit P = $38
Unit variable cost VC = $24
Fixed costs FC = $680,000
Tax rate = 22%
• Break even point
= Fixed costs / P - VC
= $680,000 / ($38 - $24)
= $680,000 / $14
= 48,571.43
Therefore, accounting break even
= Q × P
= 48,571.43 × $38
= $1,845,714.29
(a-2) What is the degree of operating leverage at the accounting break even point.
Given that;
Fixed costs = $680,00
Asset investment = $560,400
Project life span = 6 years
Depreciation = Asset investment / Project life span
= $560,00 / 6
= $93,400
Please note that at accounting level, the operating cash flow is equal to depreciation,
Operating cash flow = Depreciation = $93,400
Therefore, the degree of operating leverage is;
= 1 + Fixed costs / Operating cash flow
= 1 + $680,000 / $93,400
= 8.2805
The budgeted conversion costs for a just-in-time cell are $244,720 for 3,800 production hours. Each unit produced by the cell requires 45 minutes of cell process time. During the month, 2,100 units are manufactured in the cell. The estimated materials cost is $50 per unit. What would be the journal entry to record the materials purchased on account to produce 2,200 units
Answer: Debit to Raw and In Process Inventory $ 110,000
Credit to Accounts Payable $ 110,000
Explanation:
Budgeted Conversion Cost = $ 244,720
Total Production hours = 3,800 hours
Material cost per unit = $ 50 per unit
Material purchase for 2,200units (50 x 2,200) = $ 110,000
Journal to record purchase of raw material for 2200 units at $50
Accounts title and explanation Debit Credit
Raw and In process Inventory $ 110,000
Accounts Payable $110,000
In 2019, pastured eggs sold for more than twice the price of cage-free eggs and almost 5 times the price of conventional eggs, making pastured eggs more profitable than the other eggs. Over time, this high price for pastured eggs will likely __________ as more farmers decide to _____________- the perfectly competitive pastured egg market.
a. rise; enter
b. fall; enter
c. rise; exit
d. fall; exit
Over time the price for the pastured egg is likely to fall as more farmers decide to enter.
What do you mean by perfectly competitive market?The perfect competitive market is a type of market structure which allows multiple companies to sell the same product or service. Example: agricultural product.
As more farmers decide to enter the market, there will be more products sold in the market, so the supply of pastured eggs will become higher, and thus, the prices will fall.
Thus, Option B is the right answer.
To learn more, perfectly competitive market refer: https://brainly.com/question/1748396
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a project that will last for 8 years is expected to have equal annual cash flows of $97,900. If the required return is 7.6 percent, what maximum initial cash flows of $97,900
Question:
MC algo 5-28 Calculating NPV A project that will last for 8 years is expected to have equal annual cash flows of $97,900. If the required return is 7.6 percent, what maximum initial investment would make the project acceptable?
Multiple Choice $516,751.56 $571,237.51 $1,026,395.85 $482,301.46 $550,008.71
Answer:
PV of cash inflow = $571,237.5
Explanation:
The maximum initial investment amount to be paid is the present value of the series of the annual cash inflow discounted at the opportunity cost rate of 7.6% per annum.
In other words,the maximum to be paid for the investment should be equal to the value today of the series of eight equal annual cash flow of $97,900 discounted at 7.6%
This is given in the relationship below:
PV of cash inflow = A ×( 1- (1+r)^(-n))/r )
A- equal annual cash - 97,900. r-rate of return - 7.6%, n-number of years- 8
PV = 97,900 × ( 1 - (1+0.076)^(-8)/0.76)= 571,237.5
PV of cash inflow = $571,237.5
Ten years ago, Kronan Corporation earned $0.50 per share. Its earnings this year were $2.20. What was the growth rate in earnings per share (EPS) over the 10-year period?
Answer:
The growth rate in earnings per share (EPS) is 15.97%
Explanation:
Assuming annual growth rate is r%, hence
$0.5 x (1 + r)^10 = $2.20
(1 + r)10 = $2.20 / $0.5
(1 + r)10 = $4.4
Taking 10th root at each side,
(1 + r)10 = $4.4
[tex]\sqrt[10]{1 + r}[/tex] = [tex]\sqrt[10]{4.4}[/tex]
1+r = 1.1597
r = 1.1597 - 1
r = 0.1597
r= 15.97%
what are the competitive advantages of international businesses
Answer:
I think the above information will help you.....
an investment under consideration has a payback of six years and a cost of 876000. Assume the cash flows are conventional. If the required return is 12 percent, what is the worst-case NPV?
Answer:
-43291.14
Explanation:
Npv = net present value
Payback = 6 years
Required return = 12 percent
Cost = 876000
When we talk about last case npv we mean that cash flow has gotten to its last future. The entire cost of 876000 will have to be paid after 6 years and after that future cash flows would exist.
Npv = -876000 +(876000/1.12)⁶
= -876000+443808.86
= = -43291.14
Jordan issued 10-year, 11% bonds with a par value of $110,000. Interest is paid semiannually. The market rate on the issue date was 10%. Jordan received $116,855 in cash proceeds. Which of the following statements is True? Multiple Choice Suring must pay $116,855 at maturity and no interest payments.
Answer:
$110,000 on maturity
Interest of $6,050 semiannually
Explanation:
Jordan will pay $110,000 at maturity date with 20 payments of $6050 as interest
11% bonds at par value = $110,000
Interest paid = Semiannually
Market rate = 10%
At maturity, the par value will be paid as the par value of Jordan issued bonds is 110,000, therefore, Jordan will pay 110,000 on the maturity date.
As the bonds are issued for 10 years with semiannual payments that will be like 20 payments of $6,050 (110,000 x 10% x 6/12)
In the consensus case, what is Amazon's enterprise value on the valuation date using the exit multiple terminal value
Answer:
The exit multiple expect that the market different premise is a reasonable strategy for esteeming a business. The estimation of the business is gotten by duplicating money related measurements, for example, EBITDA or EBIT by a factor that is basic to practically identical organizations that were as of late procured. A fitting scope of products can be created by taking a gander at late equivalent acquisitions in the open market.
The various acquired is then increased by the anticipated EBIT or EBITDA in year N (last year of projection period) to give the future incentive toward the finish of year N. The future value (otherwise called terminal value) is then limited by a factor equivalent to the quantity of years in the projection time frame.
The worth got is then added to the current estimation of the free incomes to acquire the suggested venture esteem. For repetitive organizations where profit vacillate as per varieties in the economy, we utilize the normal EBITDA or EBIT over the span of the particular recurrent as opposed to the sum in year N in the projection time frame.
This implies an industry different is applied as opposed to applying a current numerous to consider the recurrent varieties of profit. On the off chance that investigators utilized a current numerous, the valuation would be influenced by financial cycles.
A Enterprise Value (EV) to Revenue Multiple is used to value a business by dividing its enterprise value by its annual revenue. The formula to calculate the Enterprise Value (EV) to Revenue Multiple is EV/Revenue
EV = Enterprise Value
EV can be denoted as (Equity Value + All Debt + Preferred Shares) – (Cash and Equivalents)
While Revenue = Total Annual Revenue
This can be calculated when we have a share price, shares outstanding, debt, and cash or its equivalence.
Suppose the country of Stan has fixed its exchange rate to the dollar. The official exchange rate is 0.50 U.S. dollars per rupee. Suppose market conditions are such that the actual equilibrium exchange rate is 0.25 U.S dollars per rupee.
1. You are a tourist in Stan. Something you wish to buy costs 100 rupees. What is the price at official exchange rates? ___________ Are products bought from Stan a good deal?
2. You are a tourist in Stan. Something you wish to buy costs 100 rupees. What is the price if you could buy at the equilibrium exchange rate?
3. Will foreigners want to demand Stan’s rupees to buy goods at the official rate? Explain.
4. Will people in Stan want to buy U.S. goods at the official exchange rates? Will they being supplying or demanding their rupees?
5. Will the monetary authorities in Stan have to buy up a surplus of their currency or sell their currency to meet a shortage of their currency to keep the exchange rate at 0.50 dollars per rupee?
Answer and Explanation:
1. At 0fficial exchange rate:
100 * 0.5 = $50
what I want to buy would be purchased at $50
at market exchange rate:
0.25 x 100 = $25
products bought from this place are not a good deal as I am paying more than the market exchange rate.
2. at equilibrium exchange rate:
100 x 0.25% = $25
the price is $25
3. from answers 1 and 2, I will not want demand Stan's rupees. the products are costly to get.
4. Stan's currency is obviously overvalued. the people from this country now has increased purchasing power so they can purchase goods in dollars, therefore they would be supplying their currency.
5. They will have to buy up the surplus of rupees so that they can easily keep up with maintaining the rupee at half a dollar.
The Medicare Supplement Right of Return Provision (Free Look Period) allows the buyer a period of ________ to return a policy and receive a full refund.
Answer:
30 days
Explanation:
This right of return provision allows the buyer a period of 30 days. This period is referred to as the free look period. It is a must that these Medicare supplement policies have notices that that are boldly written on the number one page of the policy that states that the policy holder have the right to return the policy during a period of 30 days from when it was delivered and for the person to receive full refund.
The Golden Company issues of %, 10year bonds at on March 31, 2019. The bonds pay interest on March 31 and September 30. Assume that the company uses the straightline method for amortization. The journal entry to record the issuance includes a
Answer:
Debit to Cash for $560,560
Explanation:
Based on the information given we were told that the Company issues the amount of $539,000 at 104 on March 31 2019 this means that the journal entry to record the issuance will includes a:
Debit to Cash for $560,560.
Calculated as :
Cash received = $539,000 × 104%
Cash received = $560,560
ABC Co. and XYZ Co. are identical firms in all respects except for their capital structures. ABC is all-equity financed with $475,000 in stock. XYZ uses both stock and perpetual debt; its stock is worth $237,500 and the interest rate on its debt is 10 percent. Both firms expect EBIT to be $53,000. Ignore taxes.
Requried:
a. Rico owns $23,750 worth of XYZ’s stock. What rate of return is he expecting?
b. Suppose Rico invests in ABC Co and uses homemade leverage. Calculate his total cash flow and rate of return.
c. What is the cost of equity for ABC and XYZ?
d. What is the WACC for ABC and XYZ?
Answer:
ABC Co. and XYZ Co.
a. Rico owns $23,750 worth of XYZ’s stock. What rate of return is he expecting?
Expected Rate of Return = 12.32%
b. Suppose Rico invests in ABC Co and uses homemade leverage. Calculate his total cash flow and rate of return.
Cash flow from ABC Co. = 11.16% of $23,750 = $2,650.50
Cash outflow from homemade leverage = 10% of $11,875 = $1,187.50
Total cash flows = $1,463 ($2,650.50 - $1,187.50)
Rate of return = $1,463/$11,875 x 100 = 12.32%
c. What is the cost of equity for ABC and XYZ?
Cost of Equity for ABC Co. = Expected Return on Equity
= $53,000/$475,000 x 100
= 11.16%
Cost of Equity for XYZ Co. = Expected Return on Equity
= $29,250/$237,500 x 100
= 12.32%
d. What is the WACC for ABC and XYZ?
WACC for ABC = Cost of Equity = 11.16%
WACC for XYZ = Weighted Cost of Equity + Weighted Cost of Debt
= 11.16% x 50% + 10% x 50%
= 0.0558 + 0.05
= 0.1058
= 10.58%
Explanation:
ABC:
Equity = $475,000
Expected EBIT = $53,000
Returns on Equity = $53,000/$475,000 x 100 = 11.16%
XYZ:
Equity = $237,500
Debt = $237,500
Interest on Debt = 10% = $23,750
EBIT = $53,000
Return for Equity = $29,250 ($53,000 - 23,750)
Return on Equity = $29,250/$237,500 x 100 = 12.32%
RICO is assumed to leverage debt for his shares in ABC Co. to the tune of 50% just as the debt leverage in XYZ Co.
ABC's and XYZ's costs of equity are equal to the expected returns on the equities expressed percentages of the equities.
ABC's and XYZ's WACC or Weighted Average Costs of Capital are the weighted cost of equity plus the weighted cost of debt respectively.
Red Sun Rising just paid a dividend of $2.43 per share. The company said that it will increase the dividend by 15 percent and 10 percent over the next two years, respectively. After that, the company is expected to increase its annual dividend at 4.1 percent. If the required return is 11.5 percent, what is the stock price today
Answer:
P0 = $39.76
Explanation:
The dividend discount model or DDM can be used to calculate the price of the share today. The DDM values a stock based on the present value of the expected future dividends from the stock. The price of this stock under this model can be calculated as follows,
P0 = D0 * (1+g1) / (1+r) + D0 * (1+g1) * (1+g2) / (1+r)^2 +
[ (D0 * (1+g1) * (1+g2) * (1+g3) / (r - g3)) / (1+r)^2 ]
Where,
g1 is the growth rate in the first year which is 15% g2 is the growth rate in the second year which is 10% g3 is the constant growth rate which is 4.1% r is the required rate of return P0 is the stock price today
P0 = 2.43 * (1+0.15) / (1+0.115) + 2.43 * (1+0.15) * (1+0.1) / (1+0.115)^2 +
[ (2.43 * (1+0.15) * (1+0.1) * (1+0.041) / (0.115 - 0.041)) / (1+0.115)^2 ]
P0 = $39.76
Determine fixed cost, F; average variable cost, AVC; average cost, AC; marginal cost, MC; and average fixed-cost, AFC. The fixed cost function (F) is
Answer:
Fixed Cost Function = Average Cost - Average Variable cost
Explanation:
A fixed cost is the one which does not changes with the level of production. These cost are irrelevant to number of units production. It is not affected by the units produced and sold. The change in fixed cost does not affect the marginal cost. The marginal cost is the variable cost that is incurred by producing one more unit. These costs are affected by the level of production.
A company had the following purchases during its first year of operations: Purchases January: 18 units at $128 February: 28 units at $138 May: 23 units at $148 September: 20 units at $158 November: 18 units at $168 On December 31, there were 58 units remaining in ending inventory. These 58 units consisted of 10 from January, 12 from February, 14 from May, 12 from September, and 10 from November. Using the specific identification method, what is the cost of the ending inventory?
Answer:
$8,584
Explanation:
Cost of ending inventory can be calculated by multiplying the remaining units of the given month by their purchase cost in the following month
DATA
Total remaining units n ending inventory = 58 units
10 from January at $128
12 from February at $138
14 from May at $148
12 from September at $158
10 from November at $168
Calculation
January = 10 x $128 = $1,280
February = 12 x $138 = $1,656
May = 14 x $148 = $2,072
September = 12 x $158 = $1,896
November = 10 x $168 = $1,680
Cost of ending inventory = $8,584
intext:"Gideon Company uses the direct write-off method of accounting for uncollectible accounts. On May 3, the Gideon Company wrote off the $2,000 uncollectible account of its customer, A. Hopkins. The entry or entries Gideon makes to record the write off of the account on May 3 is"
Answer:
Dr Allowance for Doubtful Accounts 2,000
Cr Accounts Receivable - A. Hopkins 2,000
Explanation:
Preparation of the Journal entry that Gideon will makes in order to record the write off of the account on May 3
Based on the information given we were told that on May 3 the Company wrote off the amount of $2,000 a uncollectible account of its customer which was A. Hopkins, this means that the Journal entry will be recorded as:
May 3
Dr Allowance for Doubtful Accounts 2,000
Cr Accounts Receivable - A. Hopkins 2,000
Courtney's Caffeine Castle is investigating the feasibility of adding a new espresso maker to its line-up of products. The marketing department believes that 15,000 units can be sold at $90 each. Courtney's requires a 30% profit margin (i.e. cost is 70% of selling price) on all products. To achieve its goal, Courtney's must keep total costs equal to or below:
A. $675,000.
B. $900,000.
C. $661,500.
D. $945,000.
Answer:
D. $945,000.
Explanation:
Canadian logging companies sell timber in the United States. To the U.S., the timber is a(n)_____, and for Canadians, the timber is a(n) _____.
Answer: import; export
Explanation:
Canadian logging companies sell timber in the United States. To the U.S., the timber is an import, and for Canadians, the timber is an export.
An import is a good that is brought into a country and sold from another country while an export is a good that a country sells to other country. Timber is a export to the United States since it's brought from Canada.
You want to make a one-time deposit today that will increase in value to $100 at the end of this year. Which rate of interest will allow you to deposit the least amount today to reach this goal
Answer:
The rate of interest is 11.111%
The Deposit should be $90 today.
The future value at the end of this year will be $100.
Explanation:
Future value of $100
Present value of $100 at 11.111% = $100/11.111 = $90
The future value of a deposit today is the value after a period of one year or so periods. The rate of interest produces the discount factor that can calculate the present value of $100. To make a one-time deposit of $90 today will increase in value to $100 using an interest rate of 11.111%.