Revise your calculations based the new information provided below and then answer the questions that follow.

A company lends $372,000 to an owner and accepts a three year, 7% note in return. The note was issued on June 1st of the current year, and will be due on June 1st of the final year of the note.

Required:
(a) Prepare the journal entry to be made when the company makes the loan and accepts the note in return. (If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field.)

• Record the 7% note receivable accepted for a loan amount of $372,000.

(b) Calculate the interest revenue to be recorded at the end of each year the note is outstanding.

(c) Prepare the journal entries to accrue the interest receivable for each year the note is outstanding. (If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field.)
Dec 31

• Record the interest receivable during the period ending December 31 for year 1.
• Record the interest receivable during the period ending December 31 for Year 2.
• Record the interest receivable during the period ending December 31 for Year 3.

(d) Prepare the journal entry to record receiving the cash at the note's maturity. (If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field.)
June 01

• Record the receipt of cash on account of 7% note receivable.

On January 1, Boston Company completed the following transactions (use a 7% annual interest rate for all transactions): (FV of $1, PV of $1, FVA of $1, and PVA of $1) (Use the appropriate factor(s) from the tables provided.)

1. Promised to pay a fixed amount of $6,500 at the end of each year for eight years and a one-time payment of $116,000 at the end of the 8th year.
2. Established a plant remodeling fund of $490,750 to be available at the end of Year 9. A single sum that will grow to $490,750 will be deposited on January 1 of this year.
3. Agreed to pay a severance package to a discharged employee. The company will pay $75,500 at the end of the first year, $113,000 at the end of the second year, and $150,500 at the end of the third year.
4. Purchased a $172,500 machine on January 1 of this year for $34,500 cash. A five-year note is signed for the balance. The note will be paid in five equal year-end payments starting on December 31 of this year.

1. In transaction (a), determine the present value of the debt. (Round your answer to nearest whole dollar.)

Present vaule _______

2-a. In transaction (b), what single sum amount must the company deposit on January 1 of this year? (Round your answer to nearest whole dollar.)

Amount to deposit _____

2-b. What is the total amount of interest revenue that will be earned? (Round your answer to nearest whole dollar.)

Intrest revenue________

3. In transaction (c), determine the present value of this obligation. (Round your answer to nearest whole dollar.)

Present vaule________

Two routes are under consideration for a new highway that will take two years to complete. The long intervalley route would be 25 miles in length and would have an initial cost of $50 million for the 1^st year and $30 million for the 2^nd year. The short transmountain route would be 10 kilometers long and would have an initial cost of $75 million for the 1st year and $50 Million for the 2^nd year. Maintenance costs are estimated at $2.5 Million per year for the long route and $1.0 Million per year for the short route for the first year. The maintenance cost is expected to rise with estimated US inflation over time. (You can estimate the inflation increase and distribution based on historical information). Based on historical information, the average US inflation rate is 3.22%. Regardless of which route is selected, the initial volume of traffic (start of 3^rd year) is expected to be 400,000 vehicles per year (normally distributed with the std dev at 20,000 vehicles). The estimated driving growth in vehicles is 2% per year starting in the 2^nd year after opening. This increase is uniformly distributed +/- 0.5%. Each option would have to be repaved every 5 years at a cost of $500,000 per mile in today’s cost (assume the same inflation rate at above). Assume a 20 year project window and an interest rate of 6%, what is the least expensive investment using NPV (Monte Carlo simulation of the cost)?

If the vehicle operating expenses are assumed to be $0.20 per mile, how might this analysis differ when considering the public benefit?

On January 1, Boston Company completed the following transactions (use a 7% annual interest rate for all transactions): (FV of $1, PV of $1, FVA of $1, and PVA of $1) (Use the appropriate factor(s) from the tables provided.)

1. Borrowed $115,200 for eight years. Will pay $6,100 interest at the end of each year and repay the $115,200 at the end of the 8th year.
2. Established a plant remodeling fund of $490,150 to be available at the end of Year 9. A single sum that will grow to $490,150 will be deposited on January 1 of this year.
3. Agreed to pay a severance package to a discharged employee. The company will pay $75,100 at the end of the first year, $112,600 at the end of the second year, and $150,100 at the end of the third year.
4. Purchased a $170,500 machine on January 1 of this year for $34,100 cash. A five-year note is signed for the balance. The note will be paid in five equal year-end payments starting on December 31 of this year.

1. In transaction (a), determine the present value of the debt. (Round your answer to nearest whole dollar.)

2-a. In transaction (b), what single sum amount must the company deposit on January 1 of this year? (Round your answer to nearest whole dollar.)

2-b. What is the total amount of interest revenue that will be earned? (Round your answer to nearest whole dollar.)

3. In transaction (c), determine the present value of this obligation.

4-a. In transaction (d), what is the amount of each of the equal annual payments that will be paid on the note?

4-b. What is the total amount of interest expense that will be incurred?

Currently a three-year zero-coupon treasury bond is traded at a price of $70.38. The Treasury plans to issue a three-year annual coupon bond, with a coupon rate of 10%. The face value of all treasury annual coupon bonds is $100.

(a) What is the yield to maturity of the three-year zero-coupon bond?

(b) At what price should the three-year coupon bond be selling for?

(c) A bond analyst comments that without calculation, he can infer whether the bond will sell above its face value or not. How can he do this? Provide a brief explanation.

(d) If two bonds have the same term to maturity, the same yield to maturity, and the same level of risk, the bonds should sell for the same price." Do you agree that this is correct? Provide a brief explanation.

(e) Lily manages a bond portfolio with the following Treasury bonds:

• 3 year zero-coupon bonds
• 3 year 10% coupon bonds
• 10 year zero-coupon bonds
• 10 year 10% coupon bonds

She believes that market interest rates are going to increase over the next several months. Accordingly, she is suggested to do the following. Comment on each suggestion and make your recommendations to Lily (e.g., whether or not to adopt the suggestion).

1. Sell the 3 year zero coupon bonds and buy the 10 year zero coupon bonds
2. Buy the 10 year zero coupon bonds and sell the 10 year 10% coupon bonds

Forecasting Cash Flow and Burn Rate

1. Create a Cash Flow Forecast on Excel using the following assumptions:
   Forecast duration: Years 0 through 5, then Exit
   Unit Sales: Sell 2000 units your first year and increase 30% per year
   Price: $100/unit first year and increase 5% per year
   COGS: Calculate based on a 75% Gross Profit Margin
   NOTE: to complete the Operating Expense section, break it into two lines: Payroll and Other
   Payroll: Start with 2 employees in year 0 paid $50,000 each; add 1 employee with every additional year, at same pay
   Other Operating Expenses: $75,000 per year starting year 0, no change over the 5 years
   Capital Expenditures: $30,000 every other year starting year 0. Assume you pay in cash, no credit
   NOTE: to complete the Working Capital section, break it into 1 line for each of the 4 components
   Increase in Accounts Receivable: Based on giving customers 60 days of credit
   Increase in Inventory: Based on keeping 3 months of Inventory on hand
   Increase in Accounts Payable: Based on your vendors giving you 30 days of credit
   Increase in Accrued Payroll: Based on paying your employees every other week
   Exit Sell company for 5x Year 5 EBITDA

1. Find the following values for a lump sum assuming annual compounding:
   1. Consider an uneven cash flow stream:
   2. Find the following values assuming a regular, or ordinary, annuity:
      • The present value of $400 per year for ten years at 10 percent
      • The future value of $400 per year for ten years at 10 percent
      • The present value of $200 per year for five years at 5 percent
      • The future value of $200 per year for five years at 5 percent
   3. The future value of $500 invested at 8 percent for one year
   4. The future value of $500 invested at 8 percent for five years
   5. The present value of $500 to be received in one year when the opportunity cost rate is 8 percent.
   6. The present value of $500 to be received in five years when the opportunity cost rate is 8 percent.

1. What is the present (Year 0) value of the cash flow stream if the opportunity cost rate is 10 percent?
   1. What is the value of the cash flow stream at the end of Year 5 if the cash flows are invested in an account that pays 10 percent annually?
   2. What cash flow today (Year 0), in lieu of the $2,000 cash flow, would be needed to accumulate $20,000 at the end of Year 5? (Assume that the cash flows for Years 1 through 5 remain the same.)

Calculate the NPV of this project. (Enter your answer in dollars, not millions of dollars, e.g., 1,234,567. Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

Miglietti Restaurants is looking at a project with the following forecasted​ sales: ​ first-year sales quantity of 35,000​, with an annual growth rate of 4.00​% over the next ten years. The sales price per unit will start at ​$42.00 and will grow at 2.00% per year. The production costs are expected to be 55​% of the current​ year's sales price. The manufacturing equipment to aid this project will have a total cost​ (including installation) of ​$2,500,000. It will be depreciated using​ MACRS,  and has a​ seven-year MACRS life classification. Fixed costs will be ​$360,000 per year. Miglietti Restaurants has a tax rate of 40​%. What is the operating cash flow for this project over these ten​ years? Find the NPV of the project for Miglietti Restaurants if the manufacturing equipment can be sold for ​$140,000 at the end of the​ ten-year project and the cost of capital for this project is 9​%. What is the operating cash flow for this project in year​ 1? MACRS Fixed Annual Expense Percentages by Recovery Class     Click on this icon to download the data from this table        

Year ​3-Year ​5-Year ​7-Year ​10-Year     1 ​33.33% ​20.00% ​14.29% ​10.00%     2 ​44.45% ​32.00% ​24.49% ​18.00%     3 ​14.81% ​19.20% ​17.49% ​14.40%     4 ​ 7.41% ​11.52% ​12.49% ​11.52%     5 ​11.52% ​8.93% ​9.22%     6 ​ 5.76% ​8.93% ​7.37%     7 ​8.93% ​6.55%     8 ​4.45% ​6.55%     9 ​6.55%   10 ​6.55%   11 ​3.28%