ACG 2021 Lecture Notes - Lecture 9: Interest
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The City of New York is planning to build a library in its downtown area. Due to budgetary
constraint, the City faces the decision on whether to build it all now (full development), or build
part now (delayed plan) and complete the project in 10 years later.
The City hires you to do a present cost analysis to compare the options described below for
perpetual life at 4% effective interest rate:
1. First cost Full development Delayed plan
$1,800,000 $900,000 now
________________________________________ $1,100,000 in 10 years
2. Annual disbursements _______ $140,000/yr $80,000/yr for 10 years
$160,000/yr thereafter
Clearly describe your engineering economic analysis and state your suggestion to the City of
New York.
Make sure to use:
To find the equivalent P | âPV(i,n,A,F,Type) |
To find the equivalent A | âPMT(i,n,P,F,Type) |
To find the equivalent F | âFV(i,n,A,P,Type) |
To find n | NPER(i,A,P,F,Type) |
To find i | RATE(n,A,P,F,Type,guess) |
Where:
i = interest
n = number of periods
A = Annual Value (or Worth)
P = Present Value (or Worth)
F = Future Value (or Worth)
Select the term that best fits each of the following definitions and descriptions.
a. | Notes receivable |
b. | Nontrade receivables |
c. | Net realizable value |
d. | Direct write-off method |
e. | Interest-bearing note |
f. | Maturity date |
g. | Promissory note |
h. | Factoring receivables |
i. | Trade discount |
j. | Present value |
k. | Allowance method |
l. | Sales discount |
m. | Negotiable note |
n. | Non-interest-bearing note |
o. | Assignment of receivables |
p. | Valuation date |
____ 21. Receivables that are evidenced by a formal written promise to pay a certain sum of money at a specified date.
____ 22. The date the principal amount of a note is due to be paid.
____ 23. The sum of future receipts or payments discounted to the present date at an appropriate rate of interest.
____ 24. A method of recognizing the estimated losses from uncollectible accounts as expenses during the period in which the sales occur.
____ 25. A note that is legally transferable by endorsement and delivery.
____ 26. Any receivable arising from transactions that are not directly associated with the normal operating activities of a business.
____ 27. A note written in the form where the face amount includes the interest charges.
____ 28. The borrowing of money with receivables pledged as security on the loan.
____ 29. A note written in the form where the maker promises to pay the face amount plus interest at a specified rate.
____ 30. An unconditional written promise to pay a certain sum of money at a specified time.