Required: 1. In transaction (a), determine the present value of the debt. Note: Round your intermediate calculations and final answer to nearest whole dollar. Present value
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Cost of Capital
Shareholders and investors who invest into the capital of the firm desire to have a suitable return on their investment funding. The cost of capital reflects what shareholders expect. It is a discount rate for converting expected cash flow into present cash flow.
Capital Structure
Capital structure is the combination of debt and equity employed by an organization in order to take care of its operations. It is an important concept in corporate finance and is expressed in the form of a debt-equity ratio.
Weighted Average Cost of Capital
The Weighted Average Cost of Capital is a tool used for calculating the cost of capital for a firm wherein proportional weightage is assigned to each category of capital. It can also be defined as the average amount that a firm needs to pay its stakeholders and for its security to finance the assets. The most commonly used sources of capital include common stocks, bonds, long-term debts, etc. The increase in weighted average cost of capital is an indicator of a decrease in the valuation of a firm and an increase in its risk.
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- Halep Inc. borrowed $30,000 from Davis Bank and signed a 4-year note payable stating the interest rate was 4% compounded annually. Halep Inc. will make payments of $8,264.70 at the end of each year. Prepare an amortization table showing the principal and interest in each payment.Required information [The following information applies to the questions displayed below.] On January 1, Boston Company completed the following transactions (use a 7% annual interest rate for all transactions): ( FV of $1, PV of $1, FVA of $1, and PVA of $1) Note: Use appropriate factor(s) from the tables provided. a. Promised to pay a fixed amount of $7,500 at the end of each year for nine years and a one-time payment of $118,000 at the end of the 9th year. b. Established a plant remodeling fund of $492,250 to be available at the end of Year 10. A single sum that will grow to $492,250 will be deposited on January 1 of this year. c. Agreed to pay a severance package to a discharged employee. The company will pay $76,500 at the end of the first year, $114,000 at the end of the second year, and $151,500 at the end of the third year. d. Purchased a $177,500 machine on January 1 of this year for $35,500 cash. A five-year note is signed for the balance. The note will be paid in five equal…! Required information [The following information applies to the questions displayed below.] On January 1, Boston Company completed the following transactions (use a 7% annual interest rate for all transactions): ( FV of $1, PV of $1, FVA of $1, and PVA of $1) Note: Use appropriate factor(s) from the tables provided. a. Promised to pay a fixed amount of $7,500 at the end of each year for nine years and a one-time payment of $118,000 at the end of the 9th year. b. Established a plant remodeling fund of $492,250 to be available at the end of Year 10. A single sum that will grow to $492,250 will be deposited on January 1 of this year. c. Agreed to pay a severance package to a discharged employee. The company will pay $76,500 at the end of the first year, $114,000 at the end of the second year, and $151,500 at the end of the third year. d. Purchased a $177,500 machine on January 1 of this year for $35,500 cash. A five-year note is signed for the balance. The note will be paid in five equal…
- ! Required information [The following information applies to the questions displayed below.] On January 1, Boston Company completed the following transactions (use a 7% annual interest rate for all transactions): ( FV of $1, PV of $1, FVA of $1, and PVA of $1) Note: Use appropriate factor(s) from the tables provided. a. Promised to pay a fixed amount of $7,500 at the end of each year for nine years and a one-time payment of $118,000 at the end of the 9th year. b. Established a plant remodeling fund of $492,250 to be available at the end of Year 10. A single sum that will grow to $492,250 will be deposited on January 1 of this year. c. Agreed to pay a severance package to a discharged employee. The company will pay $76,500 at the end of the first year, $114,000 at the end of the second year, and $151,500 at the end of the third year. d. Purchased a $177,500 machine on January 1 of this year for $35,500 cash. A five-year note is signed for the balance. The note will be paid in five equal…! Required information [The following information applies to the questions displayed below.] On January 1, Boston Company completed the following transactions (use a 7% annual interest rate for all transactions): ( FV of $1, PV of $1, FVA of $1, and PVA of $1) Note: Use appropriate factor(s) from the tables provided. a. Promised to pay a fixed amount of $7,500 at the end of each year for nine years and a one-time payment of $118,000 at the end of the 9th year. b. Established a plant remodeling fund of $492,250 to be available at the end of Year 10. A single sum that will grow to $492,250 will be deposited on January 1 of this year. c. Agreed to pay a severance package to a discharged employee. The company will pay $76,500 at the end of the first year, $114,000 at the end of the second year, and $151,500 at the end of the third year. d. Purchased a $177,500 machine on January 1 of this year for $35,500 cash. A five-year note is signed for the balance. The note will be paid in five equal…Required information [The following information applies to the questions displayed below.] On January 1, Boston Company completed the following transactions (use a 7% annual interest rate for all transactions) ( EV of $1. PV of $1. EVA of $1. and PVA of $1) Note: Use appropriate factor(s) from the tables provided. a: Promised to pay a fixed amount of $6,600 at the end of each year for six years and a one-time payment of $116,200 at the end of the 6th year. b. Established a plant remodeling fund of $490,900 to be available at the end of Year 7. A single sum that will grow to $490,900 will be deposited on January 1 of this year. c. Agreed to pay a severance package to a discharged employee. The company will pay $75,600 at the end of the first year, $113,100 at the end of the second year, and $150,600 at the end of the third year d. Purchased a $173,000 machine on January 1 of this year for $34,600 cash A five-year note is signed for the balance. The note will be paid in five equal…
- On January 1, Boston Company completed the following transactions (use a 7% annual interest rate for all transactions): (FV of $1, PV of $1, FVA of $1, and PVA of $1) (Use the appropriate factor(s) from the tables provided.) Promised to pay a fixed amount of $7,300 at the end of each year for eight years and a one-time payment of $117,600 at the end of the 8th year. Established a plant remodeling fund of $491,950 to be available at the end of Year 9. A single sum that will grow to $491,950 will be deposited on January 1 of this year. Agreed to pay a severance package to a discharged employee. The company will pay $76,300 at the end of the first year, $113,800 at the end of the second year, and $151,300 at the end of the third year. Purchased a $176,500 machine on January 1 of this year for $35,300 cash. A five-year note is signed for the balance. The note will be paid in five equal year-end payments starting on December 31 of this year. In transaction (a), determine the present value…On January 1, Boston Company completed the following transactions (use a 7% annual interest rate for all transactions): (FV of $1, PV of $1, FVA of $1, and PVA of $1) (Use the appropriate factor(s) from the tables provided.) Promised to pay a fixed amount of $8,000 at the end of each year for seven years and a one-time payment of $119,000 at the end of the 7th year. Established a plant remodeling fund of $493,000 to be available at the end of Year 8. A single sum that will grow to $493,000 will be deposited on January 1 of this year. Agreed to pay a severance package to a discharged employee. The company will pay $77,000 at the end of the first year, $114,500 at the end of the second year, and $152,000 at the end of the third year. Purchased a $180,000 machine on January 1 of this year for $36,000 cash. A five-year note is signed for the balance. The note will be paid in five equal year-end payments starting on December 31 of this year. 4-a. In transaction (d), what is the amount of…Required information [The following information applies to the questions displayed below] On January 1, Boston Company completed the following transactions (use a 7% annual interest rate for all transactions) ( EV of $1. PV of $1. EVA of $1. and PVA of $1) Note: Use appropriate factor(s) from the tables provided. a. Promised to pay a fixed amount of $6,000 at the end of each year for seven years and a one-time payment of $115,000 at the end of the 7th year. b. Established a plant remodeling fund of $490,000 to be available at the end of Year 8. A single sum that will grow to $490,000 will be deposited on January 1 of this year. c. Agreed to pay a severance package to a discharged employee. The company will pay $75,000 at the end of the first year, $112.500 at the end of the second year, and $150,000 at the end of the third year d. Purchased a $170,000 machine on January 1 of this year for $34,000 cash. A five-year note is signed for the balance. The note will be paid in five equal…
- n January 1, Ellsworth Company completed the following transactions (use an 8% annual interest rate for all transactions) (FV of $1, PV of $1, FVA of $1, and PVA of $1) Note: Use appropriate factor(s) from the tables provided. Borrowed $2,200. DOD to be repaid in five years. Agreed to pay a fixed amount of $154,000 at the end of each year for five years and a one-time payment of $2,200,000 at the end of the 5th year. Established a plant remodeling fund of $1,400,000 to be available at the end of Year 10. A single sum that will grow to $1,400,000 will be deposited on January 1 of this year. Purchased a $758,000 machine on January 1 of this year and paid cash, $404,000, A four-year note is signed for the balance. The note will be paid in four equal year-end payments starting on December 31 of this year. Required: 1. In transaction (a), determine the present value of the debt. 2-a. In transaction (b), what single amount must the company deposit January 1 of this year? 2-b. In transaction…Subject : Accounting On January 1, Boston Company completed the following transactions (use a 7% annual interest rate for all transactions): (FV of $1, PV of $1, FVA of $1, and PVA of $1) (Use the appropriate factor(s) from the tables provided.) Borrowed $117,200 for nine years. Will pay $7,100 interest at the end of each year and repay the $117,200 at the end of the 9th year. Established a plant remodeling fund of $491,650 to be available at the end of Year 10. A single sum that will grow to $491,650 will be deposited on January 1 of this year. Agreed to pay a severance package to a discharged employee. The company will pay $76,100 at the end of the first year, $113,600 at the end of the second year, and $151,100 at the end of the third year. Purchased a $175,500 machine on January 1 of this year for $35,100 cash. A five-year note is signed for the balance. The note will be paid in five equal year-end payments starting on December 31 of this year. Required: 1. In transaction (a),…Company A borrows P2,000,000 from Bank at 12% interest to be paid at the end of each year for 15 years. Find for the annual total payments under (a) equal annual amortization (b) equal principal payment methods. Construct a completeamortization schedule (as shown below) for each scheme. Year Outstanding Balance Principal Payment Interest Payment Total Payment 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 Considering the given information, find for the annual total payments undera. equal annual amortization b. equal principal payment methods if a 3-year graceperiod is charged on both principal and interest. Construct a complete amortization schedule for each scheme.