Augustine is interested in whether he should purchase an annuity or an annuity due today. The annuity that he is considering will pay $100 per year starting in 2 years and ending in 5 years. The annuity due will begin payments of $100 per year for 4 years starting in 1 years. With a discount rate of 11%, which investment should he purchase today and why?
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Ответ:
Annuity due
Explanation:
In this question we have to compare the present value based on annuity or annuity due.
On annuity:
Years Cash flows Discount factor Present value
2 $100.000.8116224332$81.16
3 $100.000.7311913813 $73.12
4 $100.000.6587309741$65.87
5 $100.000.5934513281$59.35
Present value $279.50
On annuity due
Years Cash flows Discount factor Present value
2 $100.000.9009009009$90.09
3 $100.000.8116224332$81.16
4 $100.000.7311913813 $73.12
5 $100.000.6587309741$65.87
Present value $310.24
Therefore, he should purchase annuity due as it has the high present value
Ответ:
b. $4,000
Explanation:
Calculation to determine What amount should Dunder Mifflin record as Patent Amortization Expense in the first year
Using this formula
Patent Amortization Expense =Legal fees to acquire a patent ÷ estimated useful life
Let plug in the formula
Patent Amortization Expense =$40,000/10 years
Patent Amortization Expense=$4,000
Therefore the amount that Dunder Mifflin should record as Patent Amortization Expense in the first year is $4,000