Mike’s Sporting Goods sells elliptical trainers under two payment plans: cash and installment. Under the installment...

Mike’s Sporting Goods sells elliptical trainers under two payment plans: cash and installment. Under the installment plan, the customer pays $90/month over 5 years with interest changed on the balance at a rate of 19%/year compounded monthly. Find the cash price for an elliptical trainer if it is equivalent to the price paid by a customer using the installment plan. Round your answers to two decimal places.

Solutions

Expert Solution

The cash equivalent price of the similar instalment payment can be caudated by the PV of the series annuity payment as follows

PV of annuity = PMT * ( 1-(1+r) ^-n / r )

We have monthly payments = 90

Time = 12 payment *5 years = 60 pmt s

Rate = 19% pa

Cash equival price = 90 * ( 1-(1+0.19/12) ^-60 / 0.19/12 )

Cash price = $ 3469.47

Thanks

jeff jeffy answered 2 years ago

Next > < Previous

Related Solutions

Cost of Reworked Units Warren’s Sporting Goods Store sells a variety of sporting goods and clothing....

Cost of Reworked Units Warren’s Sporting Goods Store sells a variety of sporting goods and clothing. In a back room, Warren’s has set up heat transfer equipment to personalize T-shirts for Little League teams. Typically, each team has the name of the individual player put on the back of the T-shirt. Last week, Shona Kohlmia, coach of the Terrors, brought in a list of names for her team. Her team consisted of 12 players with the following names: Mary Kate,...

(Calculating free cash flows) You are considering new elliptical trainers and you feel you can sell...

(Calculating free cash flows) You are considering new elliptical trainers and you feel you can sell 3,000 of these per year for 5 years (after which time this project is expected to shut down when it is learned that being fit is unhealthy). The elliptical trainers would sell for $1,600 each and have a variable cost of $800 each. The annual fixed costs associated with production would be $1,300,000. In addition, there would be a $3,000,000 initial expenditure associated with...

(Calculating free cash flows) You are considering new elliptical trainers and you feel you can sell...

(Calculating free cash flows) You are considering new elliptical trainers and you feel you can sell 6,000 of these per year for 5 years (after which time this project is expected to shut down when it is learned that being fit is unhealthy). The elliptical trainers would sell for $1,000 each and have a variable cost of $500 each. The annual fixed costs associated with production would be $1,500,000. In addition, there would be a $6,000,000 initial expenditure associated with...

Jake's Sporting Goods sells sporting goods and apparel in Omaha, NE. On October 17, Jake’s purchased...

Jake's Sporting Goods sells sporting goods and apparel in Omaha, NE. On October 17, Jake’s purchased $50,000 of sporting goods from Cincinnati Wholesale Distributors with terms FOB shipping point and 1/10, n/EOM. On October 18, Jake’s purchased $45,000 of sporting goods from the Chicago Sports Wholesalers with terms FOB destination and 3/15, n/30. Both suppliers hired KC Trucking Company to deliver the goods. The trucks carrying these goods collided on the bridge over the Missouri River between Omaha and Council...

Jake's Big N Sporting Goods sells sporting goods and clothes in Omaha, On September 18, Jake...

Jake's Big N Sporting Goods sells sporting goods and clothes in Omaha, On September 18, Jake (the owner) purchased $50,000 of merchandise from Chicago Wholesale Distributors fob shipping point, credit terms 3/10,n/30. On September 19, Jake purchased $45,000 of sporting goods and clothes from the Cincinnati Sports Wholesalers fob destination, credit terms 2/10,n/30. Both vendors hired KC Trucking Company to deliver the goods. The trucks carrying these goods collided on the Missouri river bridge between Omaha and Council Bluffs. Both...

Bionic Cotton Inc. manufactures and sells high-quality sporting goods equipment under its highly recognizable Cool Cat...

Bionic Cotton Inc. manufactures and sells high-quality sporting goods equipment under its highly recognizable Cool Cat logo. The company began operations on January 1, 2016, and operated at 100% of capacity (84,000 units) during the first month, creating an ending inventory of 7,000 units. During February, the company produced 76,600 garments during the month but sold 83,600 units at $106 per unit. The February manufacturing costs and selling and administrative expenses were as follows: Number of Units Unit Cost Total...

The entry to record an installment payment on a long-term note payable is Mortgage Payable Cash...

The entry to record an installment payment on a long-term note payable is Mortgage Payable Cash Interest Expense Cash Mortgage Payable Interest Expense Cash Bonds Payable Cash

Big Apple Sporting Goods is a retail store that sells a variety of sports equipment. The...

Big Apple Sporting Goods is a retail store that sells a variety of sports equipment. The company's fiscal year ends on December 31. Information to be used for the operating budget this coming year follows. Sales and Merchandise Purchases Budget Information • Sales for this coming year ending December 31 are expected to be as follows: First quarter: $600,000 Second quarter: $650,000 Third quarter: $660,000 Fourth quarter: $800,000 • Cost of goods sold is 40 percent of sales (this is...

Beaver Ltd is a retail company that sells sporting goods. It has a customer loyalty program...

Beaver Ltd is a retail company that sells sporting goods. It has a customer loyalty program that allows customers to earn points based on sales made. These points can be accumulated and used for future purchases. One customer loyalty point is awarded for every $1 of purchases. During March 20X4 the company recorded sales of $1,725,000 to the customer who were accumulating points. the stand-alone value of these goods sold was $1,725,000. Beaver has also determined that each point has...

Beaver Ltd. is a retail company that sells sporting goods. It has a customer loyalty program...

Beaver Ltd. is a retail company that sells sporting goods. It has a customer loyalty program that allows customers to earn points based on sales made. These points can be accumulated and used for future purchases. One customer loyalty point is awarded for every $1 of purchases. During March 20X4, the company recorded sales of $1,725,000 to customers who were accumulating points. The stand-alone value of these goods sold was $1,725,000. Beaver has also determined that each point has a...

Subjects