Question

1. Classify the following changes in each of the accounts as either an outflow or an inflow of cash. (1 Mark – 0.2 each)

a) Is a decrease in land and buildings an inflow or an outflow of​ cash?

b) Is an increase in accounts payable an inflow or an outflow of​ cash?

c) Is a decrease in vehicles an inflow or an outflow of​ cash?

d) Is an increase in accounts receivable an inflow or an outflow of​ cash?

e) Is the payment of dividends an inflow or an outflow of​ cash? 

2- You have $5,100 to invest today at 11​% interest compounded annually. Find how much you will have accumulated in the account at the end of​: (0.5 Marks each)

(1) 4 years,

(2) 8 years, and​

(3) 12 years.

4. Using the values​ below, answer the questions that follow:

Amount of annuity

Interest rate

Deposit period​ (years)

​$500

9​%

10

a) Calculate the future value of the​ annuity, assuming that it is

(1) ​An ordinary annuity. (0.5 marks)

(2) ​An annuity due. (0.5 marks)

b) Compare your findings in parts a​(1) and a​(2). All else being​ identical, which type of annuity—ordinary or annuity due—is preferable as an​ investment? Explain why. (0.5 Marks)

Answer 1

I have solved all the parts using some formulas and steps hope it's useful to you