Determine principal balance at the end of the term, Financial Management

Assignment Help:

1. CompuSystems was supposed to pay a manufacturer $19,000 four month ago and another $14,000 two months from now.  CompuSystems is proposing to pay $10,000 today and the balance in 5 month, when it will receive payment on the major sale to the provincial government.  What will the payment be in five months if the manufacturer requires 18% compounded monthly because the account is overdue?

2. A $40,000 mortgage loan charge interest at 9.75% compounded monthly for a 4 year term.  Month payments were calculated for a 15 year amortization.

a.  What will be the principal balance at the end of the first term?

b.  What will the monthly payment be on renewal for a 3 year term if it is calculated for an interest rate of 9%compounded monthly and an 11 year amortization period?

3.  A $1000, 8.5% coupon, 2 year Government of Canada bond was issued on June 1, 1986.   At what price died it sell on April 27, 1990 if the markets required return was 11.2% compounded semi-annually?

4.  A City can borrow $400,000, at 8% compounded quarterly or can issue $400,000 of bonds paying interest at 4% compounded quarterly.  By law the City must create a sinking fund to retire the bonds at the end of 20 years.  If the sinking fund earns 8% compounded quarterly, which is cheaper- getting the loan or issuing the bonds- and by how much each payment period?

5.  The timber rights to a tract of forest can be purchased for $90,000.  The harvesting agreement would allow 25% of the timber to be cut in each of the first, second, fourth and fifth years.  The purchaser of the timber rights would be required to replant, at its expense, the logged areas in Years 3 and 6. Arrowsmith Lumber calculates that its profit in each of the 4 cutting years would be $50,000 and that the cost of replacing the harvested areas in each Years 3 and 6 would be $20,000.

a. Should Arrowsmith Lumber by the timber rights if its cost of capital is 18%?

b. By what amount would the economic value of Arrowsmith Lumber be increased or decreased if it proceeded with purchasing the timber rights for $90,000?


Related Discussions:- Determine principal balance at the end of the term

Audit systems, Enron did not manages its trade account receivable in signif...

Enron did not manages its trade account receivable in significant manner that made huge financial loss for the organizations. Hence, the management faced biggest fraud due to the f

Sinking fund provisions, Sinking fund provisions is a pool of funds s...

Sinking fund provisions is a pool of funds set aside to repay the debt. Under this, certain amount of money is kept aside every year form profit. It is then used

How could we obtain an indisputable discount rate, How could we obtain an i...

How could we obtain an indisputable discount rate? How should we calculate the beta and the risk premium? There is no indisputable discount rate: a discount rate is a subjectiv

What do you meant by common stocks in the financial term, What do you meant...

What do you meant by common stocks in the financial term? Common Stocks: Common stocks illustrate ownership interests into the firm. Common stockholders obtain dividends (wh

Describe what is meant by application controls, QUESTION An audit team...

QUESTION An audit team is currently engaged in planning the audit of the financial statements of E Limited as at 30 June 2007. This was the first accounting period during which

Illustrate report on net present value, Q. Illustrate report on net present...

Q. Illustrate report on net present value? The NPV of a project is a positive $56000. This point to that using our cost of capital 10% as our discount rate the project is we

What happens when a bank charges discount interest on a loan, What happens ...

What happens when a bank charges discount interest on a loan? When a bank charges reduction in interest on a loan the required interest payment is subtracted from the loan proc

Cost of retained earnings , Cost of Retained earnings (K ) Retained ea...

Cost of Retained earnings (K ) Retained earnings are that portion of EPS that is retained by the firm.  This may be measured as the rate of return which the existing share hol

Currency denomination, The payment that the issuer makes to the bondh...

The payment that the issuer makes to the bondholder can be in any currency. The contract at the time of bond issue between the issuer and the investor can specify

What are the failure of mergers and takeovers, Failure of mergers and tak...

Failure of mergers and takeovers Failure of mergers and takeovers Poor strategic plan will result in slow or failed integration. Integra

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd