Question
Thanks .
As a graduation gift your father has agreed to pay the remaining balance for a down payment on a house under the following terms. If you can save $20,000, your father will pay the balance toward a down payment on a house (up to a total of $30,000). If you can save $4,000 per year, how long will it take you to reach $20,000 if you can invest the money into an account earning an annual rate of 7.50%? Select one: 3.8 years 5.2 years 4.4 years 6.1 years You mentor has always dreamed of endowing a chair in health care administration at Idaho State University that will provide a salary of $160,000 per year forever, with the first cash flow to be one year from today. If the university promises to invest the money at a rate of 4% per year, how much money must be given to the university today to make your mentors dream a reality? Select one: $3,250,000 $2,750,000 $2,000,000 $4,000,000 You just bought a CT scanner for $250,000 and are to make monthly payments for 10 years at 6% APR. Suppose you add $514.64 each month to the payment. This extra amount is applied to the principal. How long will it take you to pay off your loan of $250,000? Select one: Approximately 97 months Approximately 69 months Approximately 57 months Approximately 80 months Ridge Crest Clinic is considering the purchase of a bone densitometer. The machine will cost $190,000. The machine is expected to be technologically obsolete after 6 years and have no salvage value. Even though the life is 6 years the government currently allows a 1 year depreciation allowance on this asset. The machine is expected to generate testing revenues in the amount of $150,000 per year and additional patient visits targeted to deal with bone density in the amount of $90,000 per year. Fixed Expenses for this machine total $90,000 and COGS are $12 per scan. The contribution rate is $148 per exam. Your tax rate is 30% and you elect to depredate 100% of the equipment in the first year. Cost of Capital is 18%. You wish to make $100,000 after taxes per year on this scanner. How many scans are required in order to make $100,000 after taxes? Select one: 608 scans C 721 scans 545 scans 421 scans
Explanation / Answer
1. Answer is 4.4 years
Future value of deposits after 4 years
= 4000*1.075^3 + 4000*1.075^2 + 4000*1.075^1 + 4000*1.075^0= $17891.69
Future value of deposits after 5 years
= 4000*1.075^4 + 4000*1.075^3 +4000*1.075^2 + 4000*1.075^1 + 4000*1.075^0= $23233.564
Therefore, it would take you between 4 and 5 years to reach $20,000.
Correct answer is c. 4.4 years
2.
money must be given today = 160,000/4%=$4,000,000
d. $4,000,000
3. current monthly payment = x
250000 = x/(1+6%/12) + x/(1+6%/12)^2 + x/(1+6%/12)^3 .......x/(1+6%/12)^120
x= $2775.5125
New payment = 2775.5125+ 514.64=$3290.1525
By hit and trial
Present value of around 97 monthly payments = $250,000
$250,364.87 = $3290.1525/(1+6%/12) + $3290.1525/(1+6%/12)^2 + $3290.1525/(1+6%/12)^3 .......$3290.1525/(1+6%/12)^97
Answer: a. Approx 97 months
4.Target profit = 100,000
depreciation = $190,000
Profit = (Revenue - Fixed cost - Variable cost - Depreciation)*(1-tax)
100,000 = (150000+90000+148*number of scans - 90,000-190,000)*(1-30%)
number of scans = 721
b. 721 scans
