Concept explainers
a.
To compute: Dollar amount of each payment J receives.
Amortization:
Amortization is to write off or pay the debt over the period of time it can be for a loan or intangible assets. Its purpose is to get cost recovery. Example of amortization is, an automobile firm have made a spending of $20 million dollars on a design patent with a useful life of twenty years. The company’s amortization value will be $1 million for every year.
b.
To compute: Interest that is included in the first payment, repayment of principal,changes in value for second payment.
Amortization:
Amortization is to write off or pay the debt over the period of time it can be for a loan or intangible assets. Its purpose is to get cost recovery. Example of amortization is, an automobile firm have made a spending of $20 million dollars on a design patent with a useful life of twenty years. The company’s amortization value will be $1 million for every year.
c.
To Explain: interest on Schedule B for the next year and income in the next year.
Amortization:
Amortization is to write off or pay the debt over the period of time it can be for a loan or intangible assets. Its purpose is to get cost recovery. Example of amortization is, an automobile firm have made a spending of $20 million dollars on a design patent with a useful life of twenty years. The company’s amortization value will be $1 million for every year.
(d)
To explain: Change in amount of interest income on the constant amount over atime period.
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Chapter 5 Solutions
Fundamentals of Financial Management (MindTap Course List)
- Please show working This is a split question. See attchment for full question. Please answer all of c and d Jan sold her house on December 31 and took a $40,000 mortgage as part of the payment. The 10-year mortgage has an 11% nominal interest rate, but it calls for semiannual payments beginning next June 30. Next year Jan must report on Schedule B of her IRS Form 1040 the amount of interest that was included in the two payments she received during the year. c1. How much interest must Jan report on Schedule B for the first year? Do not round intermediate calculations. Round your answer to the nearest cent. ______________ c2. Will her interest income be the same next year?-Select- the correct choice Her interest income will increase in each successive year. Her interest income will remain the same in each successive year. She will not receive interest income, only a return of capital. Her interest income will decline in each successive year. She will receive interest only when the…arrow_forwardBefore-tax cost of debt and after-tax cost of debt David Abbot is buying a new house, and he is taking out a 30-year mortgage. David will borrow $200,000 from a bank, and to repay the loan he will make 360 monthly payments (principal and interest) of $1,199.10 per month over the next 30 years. David can deduct interest payments on his mortgage from his taxable income, and based on his income, David is in the 30% tax bracket. a. What is the before-tax interest rate (per year) on David’s loan? b. What is the after-tax interest rate that David is paying?arrow_forwardBefore-tax cost of debt and after-tax cost of debt David Abbot is buying a new house, and he is taking out a 30-year mortgage. David will borrow $194,000 from a bank, and to repay the loan he will make 360 monthly payments (principal and interest) of $1,220.60 per month over the next 30 years. David can deduct interest payments on his mortgage from his taxable income, and based on his income, David is in the 30% tax bracket. a. What is the before-tax interest rate (per year) on David's loan? b. What is the after-tax interest rate that David is paying? a. The before-tax interest rate (per year) on David's loan is %. (Round to two decimal places.)arrow_forward
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