Question
In: Accounting
Canliss Mining Company borrowed money from a local bank. The note the company signed requires five...
Canliss Mining Company borrowed money from a local bank. The note the company signed requires five annual installment payments of $16,000 beginning immediately. The interest rate on the note is 6%. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) What amount did Canliss borrow?
Solutions
Expert Solution
| Present Value of annual cash flows | = | Annual Cash flows x Present Value of annuity due of $ 1 | ||||||
| = | $ 16,000 | x | 4.4651 | |||||
| = | $ 71,442 | |||||||
| Amount borrowed was the present value of annual cash flows. | ||||||||
| So, amount borrowed was | $ 71,442 | |||||||
| Working: | ||||||||
| Present Value of annuity due of $ 1 | = | ((1-(1+i)^-n)/i)*(1+i) | Where, | |||||
| = | ((1-(1+0.06)^-5)/0.06)*(1+0.06) | i | 6% | |||||
| = | 4.4651 | n | 5 | |||||
ekkarill92 answered 1 year agoRelated Solutions
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Edit question 1 Dec. 1 Borrow $128,250 from the local bank and signed a five-year installment...
Edit question
1
Dec. 1
Borrow $128,250 from the local bank and signed a five-year
installment note with payments of $2,600 at the end of each month
beginning December 31. The annual interest rate is 8%. Current
portion of the note payable at year end after December payment =
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Group of answer choices
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