Question

In: Accounting

The Jenkins Corporation has purchased an executive jet. The company has agreed to pay $201,600 per...

The Jenkins Corporation has purchased an executive jet. The company has agreed to pay $201,600 per year for the next 10 years and an additional $2,016,000 at the end of the 10th year. The seller of the jet is charging 7% annual interest. Determine the liability that would be recorded by Jenkins. (FV of $1, PV of $1, FVA of $1, and PVA of $1) (Use the appropriate factor(s) from the tables provided. Round your answer to nearest whole dollar.)

Solutions

Expert Solution

Present value of liability $       24,40,786
Working;
Present value of annuity of 1 = (1-(1+i)^-n)/i Where,
= (1-(1+0.07)^-10)/0.07 i = 7%
= 7.023581541 n = 10
Present value of 1 = (1+i)^-n
= (1+0.07)^-10
= 0.508349292
Present value of annual cash flow = Annual Cash flow * Present value of annuity of 1
= $          2,01,600 * 7.02358154
= $       14,15,954
Present value of Terminal value = Cash flow at the end of period * Present value of 1
= $       20,16,000 * 0.50834929
= $       10,24,832
Present value of liability = Sum of Present value of cash flows
= $       14,15,954 + $ 10,24,832
= $       24,40,786

ekkarill92 answered 2 years ago
Next > < Previous

Related Solutions

The Jenkins Corporation has purchased an executive jet. The company has agreed to pay $200,000 per...
The Jenkins Corporation has purchased an executive jet. The company has agreed to pay $200,000 per year for the next 10 years and an additional $1,000,000 at the end of the 10th year. The seller of the jet is charging 6% annual interest. Determine the liability that would be recorded by Jenkins. (FV of $1, PV of $1, FVA of $1, and PVA of $1) (Use the appropriate factor(s) from the tables provided.) Present value $
2. The Jenkins Corporation has purchased an executive jet. The company has agreed to pay $201,200...
2. The Jenkins Corporation has purchased an executive jet. The company has agreed to pay $201,200 per year for the next 10 years and an additional $2,012,000 at the end of the 10th year. The seller of the jet is charging 6% annual interest. Determine the liability that would be recorded by Jenkins. (FV of $1, PV of $1, FVA of $1, and PVA of $1) (Use the appropriate factor(s) from the tables provided. Round your answer to nearest whole...
Daltrey Corporation purchased some machinery and agreed to pay the seller $5,000 at the end of...
Daltrey Corporation purchased some machinery and agreed to pay the seller $5,000 at the end of this and the next four years. Assuming 8% compounded annually, (1) What is the acquisition cost of the machinery (what is its present value?), and (2) How much interest expense will Daltrey Corporation incur over the five years? -The acquisition cost of the machinery is ? - The amount of interest expense over the five years is? (use an appropriate alebraic formula to calculate...
The Paver Corporation produces an executive jet for which it currently manufactures a fuel valve; the...
The Paver Corporation produces an executive jet for which it currently manufactures a fuel valve; the cost of the valve is indicated below: Cost per Unit Variable costs Direct material $956 Direct labor 643 Variable overhead 306 Total variable costs $1,905 Fixed costs Depreciation of equipment 502 Depreciation of building 186 Supervisory salaries 289 Total fixed costs 977 Total cost $2,882 The company has an offer from Duvall Valves to produce the part for $1,996 per unit and supply 910...
Under the terms of an interest swap, a bank has agreed to pay 10% per annum...
Under the terms of an interest swap, a bank has agreed to pay 10% per annum and receive three-month LIBOR in return on a notional principal of $100 million with payments being exchanged every three months. The swap has a remaining life of 11 months. The average of the bid and offer fixed rates currently being swapped for three-month LIBOR is 12% per annum for all maturities. The three-month LIBOR rate one month ago was 11.8% per annum. All rates...
Marlo, a publicly held corporation with a 21 percent tax rate, has agreed to pay an...
Marlo, a publicly held corporation with a 21 percent tax rate, has agreed to pay an annual salary of $1.32 million to its employee, Mrs. Ryman. In making your calculation, ignore the employer payroll tax. Compute Marlo’s after-tax cost of the salary when Mrs. Ryman is Marlo's principal executive officer (PEO). Compute Marlo’s after-tax cost of the salary when Mrs. Ryman is Marlo's Director of Marketing and the sixth most highly compensated employee in the company.
a desirable lot has become availble to jenkins company at a purchase price of 800000. jenkins...
a desirable lot has become availble to jenkins company at a purchase price of 800000. jenkins is able to make a 10% down payment and then will mke annual payments at the beginnign of each of the next 25 years at an interest rate of 6%. what should jenkins expect the annual payment to be
Howell Corporation produces an executive jet for which it currently manufactures a fuel valve; the cost...
Howell Corporation produces an executive jet for which it currently manufactures a fuel valve; the cost of the valve is indicated below: Cost per Unit Variable costs Direct material $920 Direct labor 600 Variable overhead 300 Fixed costs Depreciation of equipment 500 Depreciation of building 250 Supervisory salaries 300 The company has an offer from Duvall Valves to produce the part for $2,000 per unit and supply 1,000 valves (the number needed in the coming year). If the company accepts...
Howell Corporation produces an executive jet for which it currently manufactures a fuel valve; the cost...
Howell Corporation produces an executive jet for which it currently manufactures a fuel valve; the cost of the valve is indicated below: Cost per Unit Variable costs Direct material $920 Direct labor 600 Variable overhead 300 Fixed costs Depreciation of equipment 500 Depreciation of building 250 Supervisory salaries 300 The company has an offer from Duvall Valves to produce the part for $2,000 per unit and supply 1,000 valves (the number needed in the coming year). If the company accepts...
Howell Corporation produces an executive jet for which it currently manufactures a fuel valve; the cost...
Howell Corporation produces an executive jet for which it currently manufactures a fuel valve; the cost of the valve is indicated below: Cost per Unit Variable costs Direct material $900 Direct labor 600 Variable overhead 300 Fixed costs Depreciation of equipment 500 Depreciation of building 225 Supervisory salaries 300 The company has an offer from Duvall Valves to produce the part for $2,000 per unit and supply 1,000 valves (the number needed in the coming year). If the company accepts...
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT