Your employer has promised to give you a $5,000 bonus after you have been working for him for 5 years. What is the present value of this bonus if the proper discount rate is 8%?
Answer
Present value = 5000 x (1.08)^-8 = 3402.92
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Your employer has promised to give you a $5,000 bonus after you have been working for him for 5 years. What is the present value of this bonus if the proper discount rate is 8%?
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The U.S. government fixed the price of gold at $35 an oz in 1934. In 2005, the price of the yellow metal was $480 an oz. Calculate the price appreciation of gold as percent per year, compounded annually.
The U.S. government fixed the price of gold at $35 an oz in 1934. In 2005, the price of the yellow metal was $480 an oz. Calculate the price appreciation of gold as percent per year, compounded annually.
Answer
Number of years = n = 2005 - 1934 = 71 years
Present Value = 35, Future Value = 480 , rate =r=?
Here is our formula,
Future Value = Present Value x (1+r)^n
We need to put above values, we get
480 = 35 (1+r)^71
480/35 = (1+r)^71
13.71 =(1+r)^71
Now, we need to take 1/71 power both sides, we get
(13.71)^1/71 = (1+r)^71x1/71
1.037568 = 1+r
r = 1.037568 -1
r = 0.037568
r = 3.757%
If we use Excel, then we find it very easily, we used rate formula in excel.
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You decide to put $10,000 in a money market fund that pays interest at the annual rate of 7.2%, compounding it monthly. You plan to take the money out after one year and pay the income tax on the interest earned. You are in the 25% tax bracket. Find the total amount available to you after taxes.
You decide to put $10,000 in a money market fund that pays interest at the annual rate of 7.2%, compounding it monthly. You plan to take the money out after one year and pay the income tax on the interest earned. You are in the 25% tax bracket. Find the total amount available to you after taxes.
Answer
Interest rate = 7.2%/ 12 = 0.006
FV = 10,000 x (1.006)^12 = 10744.24
The interest earned = 10744.24-10,000=744.24
You have to pay 25% tax on this amount.
Thus after paying taxes, it becomes = 744.24 x (1-0.25) = 558.18
Total amount available after 12 months = 10,000 + 558.18 =10,558.18
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Suppose you have decided to put $200 at the beginning of every month in a savings account that credits interest at the annual rate of 6%, but compounds it monthly. Find the amount in this account after 30 years.
Suppose you have decided to put $200 at the beginning of every month in a savings account that credits interest at the annual rate of 6%, but compounds it monthly. Find the amount in this account after 30 years.
Answer
monthly rate of interest = 6%/12 = 0.005
Number of months = 30 x 12 = 360
S = 200 (1.005)^360 + 200 (1.005)^359+ …….+200 (1.005)
Here , a=200 (1.005)^360 and x = 1/1.005
FV = 200 (1.005)^360 [1-(1/1/1.005^360)] / 1-1/1.005
Now, 1/1.005^360 = 1.005^-360 (Simple math)
FV = 200 (1.005)^360 [1-1.005^-360]/1-1.005^-1
FV = 201,907.52
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Cincinnati Company has decided to put $30,000 per quarter in a pension fund. The fund will earn interest at the rate of 6% per year, compounded quarterly. Find the amount available in this fund after 10 years.
Cincinnati Company has decided to put $30,000 per quarter in a pension fund. The fund will earn interest at the rate of 6% per year, compounded quarterly. Find the amount available in this fund after 10 years.
Answer
Solution
monthly rate of interest = 6%/4 = 0.015
Number of months = 10 x4 = 40
S = 30,000 (1.015)^40 + 30,000 (1.015)^39+ …….+30,000 (1.015)
Here , a=30,000 (1.015)^40 and x = 1/1.015
FV = 30,000 (1.015)^40 [1-(1/1/1.015^40)] / 1-1/1.015
Now, 1/1.015^40 = 1.015^-40 (Simple math)
FV = 30,000 (1.015)^40 [1-1.015^-40]/1-1.015^-1
FV = 1,652,457
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You have decided to put $130 in a savings account at the end of each month. The savings account credits interest monthly, at the annual rate of 6%. How much money is in your account after 6 years?
You have decided to put $130 in a savings account at the end of each month. The savings account credits interest monthly, at the annual rate of 6%. How much money is in your account after 6 years?
Solution
monthly rate of interest = 6%/12 = 0.005
Number of months = 6 x 12 = 72
Deposit made at the end of each month so, Number of years = 72-1 = 71
S = 130 (1.005)^71 + 130 (1.005)^70+ …….+130 (1.005)
Here , a=130 (1.005)^71 and x = 1/1.005
FV = 130+[130 (1.005)^71 [1-(1/1/1.005^71)] / 1-1/1.005 ]
Now, 1/1.005^71 = 1.005^-71 (Simple math)
FV = 130+130 (1.005)^71 [1-1.005^-71]/1-1.005^-1
FV = 11,233.15
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You have started a job with an annual salary of $48,000. You will get the paycheck at the end of each month, and your deductions for taxes will be 34%. Using a discount rate of 0.8% per month, find the present value of the take home pay for the whole year.
You have started a job with an annual salary of $48,000. You will get the paycheck at the end of each month, and your deductions for taxes will be 34%. Using a discount rate of 0.8% per month, find the present value of the take home pay for the whole year.
Answer
Monthly interest rate = 0.8% = 0.008
Monthly salary = 48000/12 = 4000
Monthly salary after tax = 4000 x (1-0.34) = 2640
So Answer is 30,092.34
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Suppose you want to accumulate $10,000 for a down payment for a house. You will deposit $400 at the beginning of every month in an account that credits interest monthly at the rate of 0.6% per month. How long will it take you to achieve your goal?
Suppose you want to accumulate $10,000 for a down payment for a house. You will deposit $400 at the beginning of every month in an account that credits interest monthly at the rate of 0.6% per month. How long will it take you to achieve your goal?
Answer
Here
FV = 10000 , Per moth payments = 400, interest monthly = 0.6% =0.006
Number of years =?
10,000 = 400(1.006)+ 100(1.0075)n−1 + ... + 100(1.0075)
10,000 = 400(1.006)^n + 400(1.006)^n-1+…..+400(1.006)
Here a = 400(1.006)^n , x =1/1.006, Sn= 10,000
10,000 = 400(1.006)^n [1-1/1.006^n]/1-1/1.006
Now
1/1.006^n = 1.006^-n & 1/1.006 = 1.006^-1
10,000 = 400 (1.006)^n [1-1.006^-n]/1-1.006^-1
10,000 = 400(1.006)^n -400]/1-1.006^-1
Here
1-1.006^-1 = 0.005964
10,000 =400(1.006)^n -400]/ 0.005964
10,000 x 0.005964 = 400(1.006)^n -400
59.64 +400 = 400(1.006)^n
Divided by 400 both sides
459.64/400 = 400(1.006)^n/400
1.149105 = 1.006^n
Take ln both side
Ln(1.149105) = n ln(1.006)
Ln(1.149105)/ ln(1.006) =n
n = 23.23 is almost equal to 24 months
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Suppose you want to accumulate $25,000 as down payment on a house and the best you can do is to put aside $200 a month. If you deposit this amount at the beginning of each month in an account that credits 0.75% interest monthly, how long will it take you to attain your goal?
Suppose you want to accumulate $25,000 as down payment on a house and the best you can do is to put aside $200 a month. If you deposit this amount at the beginning of each month in an account that credits 0.75% interest monthly, how long will it take you to attain your goal?
Solution
Sn= down payment =25,000 , interest monthly = 0.75% = 0.0075
25,000 = 200(1.0075)^n+ 200(1.0075)^n−1 + ... + 100(1.0075)
25,000 = 200(1.0075)^n+ 200(1.0075)^n−1 + ... +200(1.0075)
Here a = 200(1.0075)^n, x =1/1.0075, Sn= 25,000
25,000 = 200(1.0075)^n [1-(1/1.0075^n)]/1-1/1.0075
25,000 = 200(1.0075)^n -200/0.007444169
25,000 x 0.007444169 = 200(1.0075)^n -200
186.10 = 200(1.0075)^n -200
186.10 +200 = 200(1.0075)^n
386.10 =200(1.0075)^n
386.10 /200 = (1.0075)^n
1.930521 = (1.0075)^n
Taking ln both sides, we get
Ln(1.930521) = n ln(1.0075)
N = Ln(1.930521)/ ln(1.0075)
N = 88 months
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Suppose you are a property owner and you are collecting rent for an apartment. The tenant has signed a one-year lease with $600 a month rent, payable in advance. Find the present value of the lease contract if the discount rate is 12% per year.
Suppose you are a property owner and you are collecting rent for an apartment. The tenant has signed a one-year lease with $600 a month rent, payable in advance. Find the present value of the lease contract if the discount rate is 12% per year.
Answer
Here monthly rent =$600, Number of months = 12 ,
We use this formula here
Present value of the lease contract = 600 + 600 x [1-(1.01)^-11]/0.01
Present value of the lease contract = 6820.58
Here another way to do it this one:
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Bennington Company has borrowed a certain amount from the bank that it will repay in 24 monthly installments. The bank charges 6% interest annually on this loan and the monthly payment is $6000. Find the amount of loan.
Bennington Company has borrowed a certain amount from the bank that it will repay in 24 monthly installments. The bank charges 6% interest annually on this loan and the monthly payment is $6000. Find the amount of loan.
Answer
Monthly interest = 6%/12 = 0.005
Number of months = 24
monthly payment = 6000
PV = 6000 x [1-1.005^-24]/0.005
PV = 135377.2
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Durban Corporation is interested in acquiring a machine that it can buy for $140,000 in cash. Alternatively, Durban can make five equal payments of $40,000 each, the first one due after one year, to purchase the same machine. Find the implied interest rate in the second option.
Durban Corporation is interested in acquiring a machine that it can buy for $140,000 in cash. Alternatively, Durban can make five equal payments of $40,000 each, the first one due after one year, to purchase the same machine. Find the implied interest rate in the second option.
Answer
Answer
Equal payments = $40,000, Number = 5, rate =?
FV =140,000
PV = annuity x annuity discount factor
140,000 = 40,000 [1-(1+r)^-5]/r]
Here
[1-(1+r)^-5]/r] = annuity discount factor
140,000/40,000 = annuity discount factor
3.50 = annuity discount factor
So the rate is almost 13% in this method.
In excel it is coming 13.20%
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Fisher Chemicals processes a liquid into three outputs: Sigma, Tau, and Upsilon. Sigma accounts for 59 percent of the net realizable value at the split-off point, Tau accounts for 32 percent, and Upsilon accounts for the balance.
Fisher Chemicals processes a liquid into three outputs: Sigma, Tau, and Upsilon. Sigma accounts for 59 percent of the net realizable value at the split-off point, Tau accounts for 32 percent, and Upsilon accounts for the balance. The joint costs total $637,000. If Upsilon is accounted for as a by-product, its $66,000 net realizable value at split-off is credited to the joint manufacturing costs using method 1 described in the text, which credits the by-product’s net realizable value as a reduction in the joint costs.
Required:
a-1. What are the allocated joint costs for the three outputs, if Upsilon is accounted for as a joint product?
a-2. What are the allocated joint costs for the three outputs, if Upsilon is accounted for as a by-product?
Explanation
Thanks
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Blasto, Inc., operates several mines. At one, a typical batch of ore run through the plant yields three products: lead, copper, and manganese.
Blasto, Inc., operates several mines. At one, a typical batch of ore run through the plant yields three products: lead, copper, and manganese. At the split-off point, the intermediate products cannot be sold without further processing. The lead from a typical batch sells for $42,000 after incurring additional processing costs of $11,550. The copper is sold for $90,000 after additional processing costs of $17,500, and the manganese yield sells for $61,000 but requires additional processing costs of $18,950. The joint costs of processing the raw ore, including the cost of mining, are $110,000 per batch.
Required:
Use the estimated net realizable value method to allocate the joint processing costs.
Thanks
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Great Eastern Credit Union (GECU) has two operating departments (Branches and Electronic) and three service departments (Processing, Administration, and Maintenance). During July, the following costs and service department usage ratios were recorded:
Great Eastern Credit Union (GECU) has two operating departments (Branches and Electronic) and three service departments (Processing, Administration, and Maintenance). During July, the following costs and service department usage ratios were recorded:
Required:
Allocate the service department costs to the two operating departments using the reciprocal method.
Explanation
The key to this problem is to recognize that Administration provides no service to either of the other two service departments and that Processing only provides services to Administration and not to Maintenance. Therefore, there are no reciprocal services between Administration and the other service departments or between Processing and Administration.
Thanks
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BluStar Company has two service departments, Administration and Accounting, and two operating departments, Domestic and International. Administration costs are allocated on the basis of employees, and Accounting costs are allocated on the basis of number of transactions. A summary of BluStar operations follows.
BluStar Company has two service departments, Administration and Accounting, and two operating departments, Domestic and International. Administration costs are allocated on the basis of employees, and Accounting costs are allocated on the basis of number of transactions. A summary of BluStar operations follows.
Required:
a. Allocate the cost of the service departments to the operating departments using the direct method.
b. Allocate the cost of the service departments to the operating departments using the step method. Start with Administration.
c. Allocate the cost of the service departments to the operating departments using the reciprocal method.
Thanks
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What kind of human resource (HR) model allows for certain administrative tasks to be performed by third party
What kind of human resource (HR) model allows for certain administrative tasks to be performed by third party
Outsourced benefits administration
HR service sharing
Insourced benefits administration
HR benefits accounting
The correct answer is "Outsourced benefits administration."
Outsourcing is a human resource (HR) model that involves hiring a third-party company to handle certain administrative tasks, including benefits administration, payroll processing, and recruitment. Outsourcing benefits administration can help organizations reduce costs and improve the efficiency of their HR operations. In this model, the third-party company is responsible for managing employee benefits, including health insurance, retirement plans, and other employee benefits. The organization retains overall control of the benefits program, but the third-party provider takes care of day-to-day administration.
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Which of the following activities would be a responsibility of the human resources business function?
Which of the following activities would be a responsibility of the human resources business function?
Accounting for benefit withholdings
Financing of inputs
Performance evaluation
Processing payroll
The correct answer is "Performance evaluation."
The human resources (HR) business function is responsible for managing an organization's workforce, including employee recruitment, retention, training, and development. The following activities would be a responsibility of the HR function:
Performance evaluation: The HR function is responsible for assessing employee performance and providing feedback to help employees improve and grow in their roles.
Recruitment: HR is responsible for finding and hiring qualified candidates for open positions within the organization.
Retention: HR is responsible for developing programs and policies to help retain employees, including providing competitive salaries and benefits, opportunities for growth and development, and a positive work environment.
Training and development: HR is responsible for providing training and development programs to help employees improve their skills and knowledge.
Processing payroll and accounting for benefit withholdings are typically handled by the finance or accounting function, while financing of inputs is typically handled by the finance function.
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What is at the heart of a company’s payroll business process?
What is at the heart of a company’s payroll business process?
Accounting system
Payroll accounting
Human resources
Employees and their time worked
The correct answer is "Employees and their time worked."
At the heart of a company's payroll business process is the employees and their time worked. The payroll process involves calculating employee compensation based on the number of hours worked, deductions for taxes and benefits, and other factors such as overtime and vacation time. The payroll process typically begins with collecting time and attendance data from employees, which is then used to calculate their paychecks.
The payroll process is closely tied to the human resources function, as HR is responsible for managing employee records and ensuring that they are accurate and up to date. Payroll accounting and the company's accounting system are also important components of the payroll process, as they are used to track payroll expenses and ensure that they are properly recorded in the company's financial statements.
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