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Posted: May 29th, 2023
Acc/301 WK4 problem p6-7b
Question description
P6-7B
(Time Value Concepts Applied to
Solve Business Problems)
Answer the following questions related
to Purple Cloud Inc.
(b)
Purple Cloud Inc. has completed the
purchase of 25 new tractors. The fair value of the equipment is
$1,450,000. The purchase agreement
specifies an immediate down payment of $290,000 and semian-
nual payments of $157,606 beginning
at the end of 6 months for 5 years. What is the interest rate, to
the nearest percent, used in
discounting this purchase transaction?
(c)
Purple Cloud Inc. loans money to one
of its major suppliers in the amount of $600,000. Purple Cloud
accepts an 10% note due in 5 years
with interest payable semiannually. After 1 year (and receipt of interest
for 1 year), Purple Cloud needs
money and therefore sells the note to Fourth National Bank, which
demands interest on the note of 12%
compounded semiannually. What is the amount Purple Cloud will
receive on the sale of the note?
(d)
Purple Cloud Inc. wishes to
accumulate $1,800,000 by December 31, 2024, to retire bonds outstand-
ing. The company deposits $100,000
on December 31, 2014, which will earn interest at 8% com-
pounded quarterly, to help in the
retirement of this debt. In addition, the company wants to know
how much should be deposited at the
end of each quarter for 10 years to ensure that $1,800,000 is
available at the end of 2024. (The
quarterly deposits will also earn at a rate of 8%, compounded
quarterly.) (Round to even dollars.)
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