Johnstone Company is facing several decisions regarding investing and financing
ID: 2453401 • Letter: J
Question
Johnstone Company is facing several decisions regarding investing and financing activities. Address each appropriate factor(s) from the tables provided.) 1. On June 30, 2016, the Johnstone Company purchased equipment from Genovese Corp. Johnstone agreed to pay Genovese $26,000 on the purchase date and the balance in five annual installments of $9,000 on each June 30 beginning June 30, 2017, Assuming that an interest rate of 1 1% properly reflects the time value of money in this situation, at what amount should Johnstone value the equipment? able values are based on: n= Cash Flow Installments Down Payment Amount Present Value Value of the equipment 2. Johnstone needs to accumulate sufficient funds to pay a $560,000 debt that comes due on December 31, 2021. The company will accumulate the funds by making five equal annual deposits to an account paying 8% interest compounded annually. Determine the required annual deposit if the first deposit is made on December 31, 2016. Table or calculator function: Future Value: Deposit:Explanation / Answer
Answer:1
PV = $26,000 + 9,000 (3.69590*) = $59263.10 = Equipment
*Present value of an ordinary annuity of $1: n = 5, i = 11% (from Table 4)
Answer:2
$560,000 = Annuity amount × 6.3359*
*Future value of an annuity due of $1: n = 5, i = 8% (from Table 5)
Annuity amount = $560,000
FV factor= 6.3359
Annuity amount = $88385.23 = Required annual deposit
Answer:3 PVAD = 136,000 (6.53705*) = $889039 = Lease liability
*Present value of an annuity due of $1: n = 10, i = 11% (from Table 6)
Table value are based on: n 5 i 11% Cash flow Amount PV Installment 9000 33263 Down payment 26000 26000 Value of the equipment 59263Related Questions
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