Question

Answer the following questions related to Shamrock Inc. (For calculation purposes, use 5 decimal places as displayed in the factor table provided.)

Shamrock Inc. has completed the purchase of new Surface computers. The fair value of the equipment is $471,625. The purchase agreement specifies an immediate down payment of $100,000 and semiannual payments of $24,788 beginning at the end of 6 months for 9 years. What is the interest rate, to the nearest percent, used in discounting this purchase transaction?

Interest rate

enter the semiannual interest rate in percentages

% semiannually

ShamrockInc. has $170,718 to invest. The company is trying to decide between two alternative uses of the funds. One alternative provides $32,000 at the end of each year for 8 years, and the other is to receive a single lump-sum payment of $422,695 at the end of the 8 years. Which alternative should Shamrock select? Assume the interest rate is constant over the entire investment.

select an alternative                                                                      Alternative TwoAlternative One

Shamrock Inc. wishes to accumulate $1,300,000 by December 31, 2027, to retire bonds outstanding. The company deposits $200,000 on December 31, 2017, which will earn interest at 7% compounded quarterly, to help in the retirement of this debt. In addition, the company wants to know how much should be deposited at the end of each quarter for 7 years to ensure that $1,300,000 is available at the end of 2027. (The quarterly deposits will also earn at a rate of 7%, compounded quarterly.) (Round answer to 0 decimal places, e.g. 458,582.)

Annuity of value of quarterly deposits

$enter the Annuity of value of quarterly deposits in dollars rounded to 0 decimal places

Shamrock loans money to Luck Corporation in the amount of $300,000. Shamrock accepts an 10% note due in 9 years with interest payable semiannually. After 2 years (and receipt of interest for 2 years), Shamrock needs money and therefore sells the note to Denver National Bank, which demands interest on the note of 12% compounded semiannually. What is the amount Shamrock will receive on the sale of the note? (Round answer to 0 decimal places, e.g. 458,581.)

Amount received on sale of note

$enter a dollar Amount received on sale of note rounded to 0 decimal places

Answer 1

X for 1 А в 11 fair value of equipment down payment present value of total semiannual payments semiannual payment Interest rate $ 471,625 $ 100,000 $ 371,625 $ 24,788 2.00% semiannually amount to be invested $ 170,718 annual receipt in alternative 1 $ 32,000 effective interest rate in alternative 1 10% lump sum receipt in alternative 2 $ 422,695 effective interest rate in alternative 2 12% choose Alternative Two reason - because it has the higher effective interest rate (lump sum payment at the end) initial amount deposited table factor future value of initial amount deposited total amount required balance amount required table factor Annuity of value of quarterly deposits $ 200,000 2.00160 $ 400,320 $ 1,300,000 $ 899,680 57.23413 $ 15,719 semiannual interest payment table factor present value of interest to be received maturity value table factor present value of maturity value Amount received on sale of note $ 15,000 9.29498 $ 139,425 $ 300,000 0.44230 $ 132,690 $ 272,115

for formulas and calculations, refer to the image below -

- X for 1 4 А в F G fair value of equipment 471625 down payment 100000 present value of total semiannual payments =D2-D3 semiannual payment 24788 Interest rate =RATE(18,D5,-D4) semiannually amount to be invested 170718 annual receipt in alternative 1 32000 effective interest rate in alternative 1 =RATE(8,09,-D8) lump sum receipt in alternative 2 422695 effective interest rate in alternative 2 | =RATE(8,0,D8, D11) choose Alternative Two reason - because it has the higher effective interest rate (lump sum payment at the end) initial amount deposited table factor future value of initial amount deposited total amount required balance amount required table factor Annuity of value of quarterly deposits 200000 =ROUND(-FV(1.75%,40,0,1),5) =D16*D17 1300000 =D19-D18 =ROUND(-FV(1.75%,40,1),5) =D20/D21 4 semiannual interest payment table factor present value of interest to be received maturity value table factor present value of maturity value Amount received on sale of note =300000*5% =ROUND(-PV(6%,14,1),5) =D24*D25 300000 =ROUND(-PV(6%,14,0,1),5) =D27*D28 =D26+D29

In case you have any query, kindly ask in comments.