At the time the mortgage is obtained, approximately $850,000 of the $900,000 would be classified as a long-term liability.
In the first year, the company pays $20,000 of the principal. In the second year, it pays $30,000 of the principal. This means that by the end of the second year, the company has paid a total of $20,000 + $30,000 = $50,000 of the principal.
Now, the remaining principal balance is $900,000 - $50,000 = $850,000.
Since the company will pay the remainder of the principal evenly over the final 28 years, you can calculate the annual principal payment for the remaining term:
$850,000 / 28 years = $30,357.14 per year (rounded to the nearest cent).
At the time the mortgage payable is obtained, the long-term liability portion of the mortgage is the total principal amount to be paid after the first two years. Therefore, it is:
$20,000 (Year 1 principal payment) + $30,000 (Year 2 principal payment) + ($30,357.14 x 28) ≈ $850,000.
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The amount of the $900,000 mortgage payable classified as a long-term liability is $870,000.
To determine the amount of the $900,000 mortgage payable that would be classified as a long-term liability at the time the mortgage is obtained, we need to calculate the portion of the principal that will be paid over the first year, second year, and the remaining 28 years.
Therefore, the amount of the $900,000 mortgage payable that would be classified as a long-term liability at the time of obtaining the mortgage is the sum of the principal payments in the first year and the remaining principal payment over the final 28 years: $20,000 + $850,000 = $870,000.
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Years 11-20: 12%
Required: What is the maximum amount the Claussens should pay John Duggan for the hardware store?
Answer:
Explanation:
Calculate maximum that should pay:
Compute present value of cash flows from the store, year 1 to 5:
Annual cash flows are $70,000
Desired rate of return on investment for 1 to 5 years is 7%
Number of years is 5
Present value of cash flows generated during 1 to 5 years =
= $287,013.82
Compute present value of cash flows from the store for years 6 to 10
Annual cash flows are $70,000
Desired rate of return on investment for 6 to 10 years is 10%
Desired rate of return on investment for 1 to 5 years is 7%
Number of years is 5
Present value of cash flows generated during 6 to 10 years = annual cash flows x PVIFA (10%,5) x PVIF (7%,5)
= $70,000 x 3.79079 x 0.7130 = $189,198.33
Compute present value of cash flows from the store for years 11 o 20
Annual cash flows are $70,000
Desired rate of return on investment for 11 to 20 years is 12%
Desired rate of return on investment for 6 to 10 years is 10%
Desired rate of return on investment for 1 to 5 years is 7%
Number of years is 10
Present value of cash flows generated during 11 to 20 years = [annual cash flows x PVIFA (12%,10)] x PVIF (10%,5) x PVIF (7%,5)
= $70,000 x 5.65022 x 0.62092 x 0.7130 = $175,100.98
Calculate present value of estimated sale amount to be received for sale of store
Present value of estimted sale amount to be received = [Estimated sale amount x PVIF (12%,10)] x PVIF (10%,5) x PVIF (7%,5)
=$400,000 x 0.32197 x 0.62092 x 0.7130=
=$57,016.50
Calculate total maximum amount that should be paid
Particulars Amount ($)
Present value of cash flows during 1 to 5 years $287,013.82
Present value of cash flows during 6 to 10 years $189,198.33
Present value of cash flows during 11 to 20 years $175,100.98
Present value of estimated sale value $57,016.50
Maximum amount that C should pay to JD for store $708,329.63
Therefore, Maximum amount that should be paid $708,329.63
Answer:
The present value of security is $2300
Explanation:
The value or price of the perpetuity today is calculated by dividing the constant cash flow it provides per period by the interest rate or the rate of return (r). Thus the price of this perpetuity according to the formula will be,
Value of perpetuity = Cash flow / r
Value of perpetuity = 115 / 0.05
Value of perpetuity = $2300
A bond is an 'I owe you' note where the lender (the investor) lends capital to the borrower (the issuing entity) in return for a bond and gets paid back the face value plus interest at a predetermined rate. Legacy in this case has issued $570,000 worth of bonds with an 8.5% interest rate for four years, selling them at a rate of $508,050 when the current market rate is 12%. The price of a bond is influenced by current market rates.
The subject of the question pertains to bonds, which are part of the financial market. A bond is an 'I owe you' note that an investor buys in exchange for lending capital to an entity, like a corporation or government. In this scenario, Legacy is issuing bonds of $570,000 with an 8.5% interest rate for four years, that pay on a semiannual basis. These bonds are sold at $508,050 when the market rate is 12%.
When buying a bond, an investor becomes the lender and the issuing entity becomes a borrower who agrees to pay back the face value of the bond at maturity, plus an agreed-upon interest rate. As mentioned above, the bond has a coupon rate, usually semi-annual, and a maturity date when the borrower will pay back its face value and last interest payment. By these parameters of face value, interest rate, and maturity date, a buyer can calculate a bond's present value. This value may not be the same as the bond's face value.
If you consider a market rate now at 12%, you know that you could invest $964 in an alternative investment and receive $1,080 a year from now; or $964(1 + 0.12) = $1080. This means you would not pay more than $964 for the original $1,000 bond. Therefore, the price of a bond is influenced by the current market rate.
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A bond is an "I owe you" note that an investor receives in exchange for money. Legacy issued bonds at a price lower than the face value due to higher market interest rates.
In financial terms, a bond is an "I owe you" note that an investor receives in exchange for money. The bond has a face value, a coupon rate, and a maturity date. Combining these elements and market interest rates, a buyer can compute a bond's present value. Legacy issued $570,000 of 8.5%, four-year bonds at $508,050 when the market rate is 12%. This means that the present value of the bonds is less than the face value because the market rate is higher than the coupon rate.
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Answer:
$20.83
Explanation:
The computation of the cost of preferred stock is shown below:
Cost of preferred stock = (Dividend × par value) ÷ (current selling price) × 100
= (10% × 100) ÷ ($48) × 100
= 10 ÷ 48 × 100
= $20.83
Simply we divide the dividend by the current selling price so that the cost of preferred stock can be computed
All other information which is given is not relevant. Hence, ignored it
Answer:
The correct answer is letter "D": illegal.
Explanation:
Blockbusting is the illegal practice by which real estate brokers spread the word among homeowners of a given area that the price of their properties is undervalued because of any false reason made up by the broker in an attempt of having owners to sell their houses so the broker can have more listings.
As a result of blockbusting, the price of houses decline. The license of brokers engaged in this activity is subject to disciplinary action.