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(twelve per year). Compare the annual cash outflows of the two payments. Why
does the monthly payment plan have less total cash outflow each year?
Original Problem from Chapter 4, Problem 12 to go with Chapter 5 Problem 5:
12. Payments . Sam Hinds, a local dentist, is going to remodel the dental
reception area and add two new workstations. He has contacted A-Dec, and the
new equipment and cabinetry will cost $18,000. A-Dec will finance the
equipment purchase at 7.5% over a six-year period. What will Hinds have to
pay in annual payments for this equipment?
Chapter 5: Problem 7
7. Future value with periodic rates . Matt Johnson delivers newspapers and is
putting away $15.00 every month from his paper route collections. Matt is eight
years old and will use the money when he goes to college in ten years. What will
be the value of Matt’s account in ten years with his monthly payments if he is
earning 6% (APR), 8% (APR), or 12% (APR)?
Chapter 5: Advanced Problem 1a & 1b
1. Monthly amortization schedule . Sherry and Sam want to purchase a condo at
the coast. They will spend $650,000 on the condo and are taking out a loan for
the whole amount for the condo for twenty years at 7.0% interest.
a. What is the monthly payment on the mortgage? Construct the amortization of
the loan for the twenty years in a spreadsheet to show the interest cost, the
principal reduction, and the ending balance each month.
b. Then change the amortization to reflect that after ten years, Sherry and Sam
will increase their monthly payment to $7,500 per month. When will they fully
repay the mortgage with this increased payment if they apply all the extra
dollars above the original payment to the principal?
Chapter 14: Problems 9, 10, 11 & 12 listed below:
9. Financial ratios: Liquidity . Calculate the current ratio, quick ratio, and cash
ratio for Tyler Toys for 2013 and 2014. Should any of these ratios or the change
in a ratio warrant concern for the managers of Tyler Toys or the shareholders?