Exercise 24-8 Pierre’s Hair Salon is considering opening a new location in Frenc
ID: 2423287 • Letter: E
Question
Exercise 24-8 Pierre’s Hair Salon is considering opening a new location in French Lick, California. The cost of building a new salon is $265,600. A new salon will normally generate annual revenues of $59,171, with annual expenses (including depreciation) of $40,300. At the end of 15 years the salon will have a salvage value of $77,500.
Calculate the annual rate of return on the project. (Round answer to 0 decimal places, e.g. 125.
Jerry Rees invested $9,000 at 10% annual interest, and left the money invested without withdrawing any of the interest for 11 years. At the end of the 11 years, Jerry withdrew the accumulated amount of money.
Click here to view the factor table.
(For calculation purposes, use 5 decimal places as displayed in the factor table provided.)
(a) What amount did Jerry withdraw, assuming the investment earns simple interest?
Mayer Company signed a lease for an office building for a period of 8 years. Under the lease agreement, a security deposit of $9,600 is made. The deposit will be returned at the expiration of the lease with interest compounded at 5% per year.
Click here to view the factor table.
(For calculation purposes, use 5 decimal places as displayed in the factor table provided.)
What amount will Mayer receive at the time the lease expires? (Round answer to 2 decimal places, e.g. 25.25.)
%
Jerry Rees invested $9,000 at 10% annual interest, and left the money invested without withdrawing any of the interest for 11 years. At the end of the 11 years, Jerry withdrew the accumulated amount of money.
Click here to view the factor table.
(For calculation purposes, use 5 decimal places as displayed in the factor table provided.)
(a) What amount did Jerry withdraw, assuming the investment earns simple interest?
$2.8531
(b) What amount did Jerry withdraw, assuming the investment earns interest compounded annually? (Round answer to 2 decimal places, e.g. 25.25.)
The amount Jerry withdrew
$2.85312
Mayer Company signed a lease for an office building for a period of 8 years. Under the lease agreement, a security deposit of $9,600 is made. The deposit will be returned at the expiration of the lease with interest compounded at 5% per year.
Click here to view the factor table.
(For calculation purposes, use 5 decimal places as displayed in the factor table provided.)
What amount will Mayer receive at the time the lease expires? (Round answer to 2 decimal places, e.g. 25.25.)
$9601
Explanation / Answer
Details Amt $ Cost of Building = 265,600.00 Salvage value 77,500.00 Average Investment=(265600+77500)/2= 171,550.00 Annual Revenue 59,171.00 Annual Expense 40,300.00 Annual Net Income 18,871.00 Annual rate of return=18871/171550= 11.00% a Principal invested by Jerry 9,000.00 Simple interest per year @10% 900.00 Interest in 11 years 9,900.00 Total amount withdrawn after 11 years= 18,900.00 b If the interest is compounded , Compounding factor for 11 years@10%= 2.85312 So Maturity value =9000*2.85312= 25,678.05 So Jerry will withdraw $25678 in this case. c Security Deposit amount 9,600.00 Compounding factor @5% for 8 years = 1.47746 So maturity value =9600*1.47746= 14,183.57 So Mayer will receive $14183.57 whenthe lease expires.
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.