Time Value Concepts Applied to Solve Business Problems

Answer
(Time Value Concepts Applied to Solve Business Problems) Answer the following questions
related to Mark Grace Inc.(a) Mark Grace Inc. has $572,000 to invest. The company is trying to
decide between two alternative uses of the funds. One alternative provides $80,000 at the end
of each year for 12 years, and the other is to receive a single lump sum payment of $1,900,000
at the end of the 12 years. Which alternative should Grace select? Assume the interest rate is
constant over the entire investment.(b) Mark Grace Inc. has completed the purchase of new
IBM computers. The fair market value of the equipment is $824,150. The purchase agreement
specifies an immediate down payment of $200,000 and semiannual payments of $76,952
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) Mark Grace Inc. loans money to John Kruk
Corporation in the amount of $600,000. Grace accepts an 8% note due in 7 years with interest
payable semiannually. After 2 years (and receipt of interest for 2 years), Grace needs money
and therefore sells the note to Chicago National Bank, which demands interest on the note of
10% compounded semiannually. What is the amount Grace will receive on the sale of the
note?(d) Mark Grace Inc. wishes to accumulate $1,300,000 by December 31, 2013, to retire
bonds outstanding. The company deposits $300,000 on December 31, 2003, which will earn
interest at 10%compounded 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 $1,300,000 is available at the end of 2013. (The quarterly deposits will also earn
at a rate of 10%, compounded quarterly.) Round to even dollars.View Solution:
Time Value Concepts Applied to Solve Business Problems Answer
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