A student owes the bookstore $900 and doesn't have the money to pay the full balance. The college...
Question:
A student owes the bookstore $900 and doesn't have the money to pay the full balance. The college offers two payment options:
1. Pay $300 today and $700 in two years.
2. Pay $1,200 three years from today.
Assuming the cost of money is 8% compounded annually, which alternative should be selected?
Present value
Present value is a measure of time value of money which shows the time preference of money which means that the money in future is less preferred over the money in present so future money should be compensated with some interest.
Answer and Explanation: 1
Become a Study.com member to unlock this answer! Create your account
View this answerHere we need to use the present value formula to compare these two options
Option 1
PV = C/(1+r)^p
Where
C = cashflows = 300 and 700
r = 8%
p =...
See full answer below.
Ask a question
Our experts can answer your tough homework and study questions.
Ask a question Ask a questionSearch Answers
Learn more about this topic:
Get access to this video and our entire Q&A library
How to Calculate the Present Value of an Annuity
from
Chapter 8 / Lesson 3
6.2K
Learn how to find present value of annuity using the formula and see its derivation. Study its examples and see a difference between Ordinary Annuity and Annuity Due.
Related to this Question
- A university decides to offer students two different tuition options. In the first, a new freshman can pay a one-time fixed payment of $100,000. In the second, the student would make four annual payments of $29,000 each. The university would guarantee the
- While she was a college student, angel lived by a bookstore located near campus. she thinks a bookstore located on the other side of campus would be successful. She incurs expenses of $42,800 (legal f
- A university's meal plan for students provides that 40% of a student's meal fee is made available to the student to purchase food at "cost." At the end of the term, the student receives a refund for any of this amount that has not been spent. The other 60
- While she was a college student, Juliet worked in a bookstore located near campus. She thinks a bookstore located on the other side of campus would be successful. She incurs expenses of $18,000 (accou
- Mr. Ainspan is a college student working on a degree in accounting. He received the following in 2019: -A $4,000 scholarship used for tuition at State University. -A $1,000 scholarship used for fees and books. -An $8,000 fellowship was used for his room a
- Mike is a college student who has big ideas but often fails to follow through on those ideas. Mike's parents have agreed to loan him money to pay for his tuition, books, and room and board. Mike is re
- John, age 25, is a full-time student at a state university. John lives with his sister, Ann, who provides over half of his support. His only income is $4,000 of wages from a part-time job attire college bookstore. What is Ann's filing status for 2012? A.
- A public university bills $80,000,000 in tuition and fees and provides $23,000,000 in financial aid. Of this $23 million, the university pays $1,000,000 directly in cash to students who can use it for whatever purpose they want. What amount will the unive
- Ron, 19, is a full-time graduate student at Post University. During the year he received the following payments: Scholarships for ten months (tuition and books) $6,000 Loan from college financial aid
- Susan is trying to decide whether or not to attend college during the next 12-week session. She has the following options. A. Attend college full-time at a cost of $1,200. B. Attend college part-time at a cost of $500 and work part-time earning $1,900. C.
- What is the amount of Lifetime Learning Credit allowed to a taxpayer, assuming that he or she incurred $3,000 in tuition and fees and $8,000 in room and board, for an eligible college student?
- This fall Amy and Bob paid $5,000 for their son Josh's tuition and fees at State University (a qualified education institution). They also paid $1,000 for Josh's books. How much of these two payments
- Shaun is a student who has received an academic scholarship to State University. The scholarship paid $16,300 for tuition, $2,400 for fees, and $1,770 for books. In addition, Shaun's dormitory fees of $8,800 were paid by the University when he agreed as a
- Student tuition at Boehring University is $160 per semester credit hour. The state supplements school revenue by $100 per semester credit hour. Average class size for a typical 3 -credit course is 50
- Shaun is a student who has received an academic scholarship to State University. The scholarship paid $17,400 for tuition, $2,800 for fees, and $1,100 for books. In addition, Shaun's dormitory fees of $12,050 were paid by the University when he agreed as
- The cost of tuition at public universities has been steadily increasing over the years. One Midwestern university pledged to keep the tuition constant for 4 years for all students who finished in the
- Royalton Bookstore ordered 1,000 copies of an introductory physics textbook from Prentice Hall on July 17, 20X0. The books were delivered on August 12, at which time a bill was sent requesting payment of $90 per book. However, a 2% discount was allowed if
- Judy hires students to sell magazine subscriptions at $300 per student per week. She leases equipment that costs $600 per week. The table gives Judy's total product schedule. Labor (students) Out
- Highlands College is a public college which received tuition and fees of $21,000,000. The college also awarded scholarships, for which no services were required, amounting to $2,500,000. In addition, the college offered graduate assistantships, for which
- The cost of tuition at public universities has been steadily increasing for many years. One Midwestern university pledged to keep the tuition constant for 4 years for all students who finished in the
- Uddin Publishing Co. publishes college textbooks that are sold to bookstores on the following terms. Each title has a fixed wholesale price, terms f.o.b. shipping point, and payment is due 65 days aft
- Colleges and universities record tuition and fee revenue in the: a. Restricted current fund b. Restricted operating fund c. General fund d. Unrestricted current fund
- Susan is trying to decide whether or not to attend college during the next 12-week session. She has the following options: 1. Attend college full-time at a cost of $1,200. 2. Attend college part-time at a cost of $400 and work part-time earning $1,800. 3.
- Susan is trying to decide whether or not to attend college during the next 12-week session. She has the following options: 1. Attend college full-time at a cost of $1200.00 2. Attend college part-time at a cost of $600 and work part-time earning $1700.00
- Tuition and fees at a state university are $5,000 per year. If Sara starts college this year, she must quit her $25,000 per year job. Tyler is unemployed and also thinking of going back to school. Based on this information, which of the following is corre
- A scholarship recipient at Bowie State University may exclude from gross income the scholarship proceeds used to pay for: a. Tuition, books, and supplies b. Tuition, books, supplies, meals, and lodg
- All of the following would be excluded from income as a qualified scholarship by an individual who is a candidate for a degree at a qualified educational institution, except: a. Tuition b. Student fees c. Course books d. Room and board
- Nodhead College needs a new computer. It can either buy it for $240,000 or lease it from Compulease. The lease terms require Nodhead to make 6 annual payments (prepaid) of $55,000. Nodhead pays no tax. Compulease pays tax at 30%. Compulease can depreciate
- Scenario: You walk to your nearby college bookstore a week before class is scheduled to start it but they don't have it in stock. How do you feel as a customer? What are your alternatives as a custom
- Alican just graduated with a degree in Business Administration and started a new job with a net monthly salary of 3,200 TL. First, he wants to pay his tuition loans (20,000 TL) and debt on credit card
- The college campus bookstore uses a periodic inventory system. The bookstore purchases 445 copies of a textbook at $71 each in June, 980 copies in August at $73 each, and 640 copies in December at $76 each. The bookstore sold 1,895 copies of the textbook
- Your mother wants to encourage you to complete college, so she promises you the following cash flows, to be paid at the end of each year: Year ; Cash Flow ; 1 ; $ 780 ; 2 ; 860 ; 3 ; 0 ; 4 ; 1,450 ; W
- The college campus bookstore uses a periodic inventory system. The bookstore purchases 420 copies of a textbook at $66 each in June, 975 copies in August at $68 each, and 600 copies in Decemberat $71 each. The bookstore sold 1,890 copies of the textbook d
- Stein Books Inc. sold 1,900 finance textbooks for $250 each to High Tuition University in 2013. These books cost $210 to produce. Stein Books spent $12,200 (selling expense) to convince the university
- Uncle has agreed to finance Nephews college education $30,000 to $40,000 annual costs for 4 years). However, Uncle is unsure of whether to (1) write cheeks to Nephew, which he will then use to pay his educational costs or (2) write checks directly to the
- Bozeman College requires students to pay tuition each term before classes begin. Students who have not paid their tuition are not allowed to enroll or to attend classes. What journal entry do you thin
- Uddin Publishing Co. publishes college textbooks that are sold to bookstores on the following terms. Each title has a fixed wholesale price, terms f.o.b. shipping point and payment is due 60 days afte
- Uddin Publishing Co. publishes college textbooks that are sold to bookstores on the following terms. Each title has a fixed wholesale price, terms f.o.b. shipping point, and payment is due 60 days aft
- This fall Marsha and Jeff paid $5,000 for their son Josh's tuition and fees at State University (a qualified education institution). They also paid $1,000 for Josh's books. How much of these two payme
- College Bookstore is facing increased competition from online resellers and electronic media forms. To combat eroding sales, management adopted new discounting policies as follows: - Students are offe
- Barry is a freshman at Hollyhock University. He estimates that the cost of tuition, books, room, board, transportation, and everyday living expenses will be $10,954 per year. He expects that these exp
- Barney is a full-time graduate student at State University. He serves as a teaching assistant for which he is paid $700 per month for 9 months and his $5,000 tuition is waived. The university waives tuition for all of its employees. In addition, he receiv
- Thomas Book Sales, Inc., supplies textbooks to college and university bookstores. The books are shipped with a proviso that they must be paid for within 30 days but can be returned for a full refund credit within 90 days. In 2009, Thomas shipped and bille
- You loaned your roommate $4,500 for next semester's tuition. Your roommate promised to pay you back next summer from his summer employment. However, next summer, you realized that your roommate never found a job but vacationed all summer in Europe. He e-m
- Rochelle needed to borrow $3,000 for three months in order to pay for college expenses while waiting for her scholarship to arrive. After Rochelle filled out the loan application, the loan officer at the bank asked her if she would like to pay the interes
- Stein Books Inc. sold 1,700 finance textbooks for $210 each to High Tuition University in 20X1. These books cost $170 to produce. Stein Books spent $12,300 (selling expense) to convince the university to buy its books. Depreciation expense for the year w
- Stein Books Inc. sold 2,200 finance textbooks for $250 each to High Tuition University in 2013. These books cost $200 to produce. Stein Books spent $12,900 (selling expense) to convince the university to buy its books. Depreciation expense for the year wa
- Anna is a 21-year-old full-time college student (she plans on returning home at the end of the school year). Her total support for the year was $34,000 (including $8,000 of tuition). Anna covered $12,000 of her support costs out of her own pocket (from sa
- John Rider wants to accumulate $100,000 to be used for his daughter's college education. He would like to have the amount available on December 31, 2021. Assume that the funds will accumulate in a cer
- John Rider wants to accumulate $140,000 to be used for his daughter's college education. He would like to have the amount available on December 31, 2021. Assume that the funds will accumulate in a cer
- Kern's Book Warehouse distributes hardcover books to retail stores and extends credit terms of 1/10, n/30 to all of its customers. At the end of May, Kern's inventory consisted of books purchased for
- Kern's Book Warehouse distributes hardcover books to retail stores and extends credit terms of 2/10, n/30 to all of its customers. At the end of May, Kern's inventory consisted of books purchased for
- A Kern's Book Warehouse distributes hardcover books to retail stores and extends credit terms of 2/10, n/30 to all of its customers. At the end of May, Kern's inventory consisted of books purchased fo
- Roger Burrows, age 19, is a full-time student at Marshall College and a candidate for a bachelor s degree. During 2015, he received the following payments: Private scholarship for tuition $9,600 Loan from financial aid office $6,500 Cash support from pare
- Stu Dent needs to pay tuition of $2,290 for a special cooking class. The tuition is due in three months. He has money set aside but he's afraid that he might spend it. His brother offers to hold his money for him and will even give him simple interest on
- Suppose Piranha.com sells 3,500 books on account for $17 each (the cost of these books is $35,700) on October 10, 2018, to The Textbook Store. One hundred of these books (cost $1,020) were damaged in shipment, so Piranha.com later received the damaged goo
- The Rebel Book Store sells books and other supplies to students in a state where the sales tax rate is 7 percent. The Rebel Book Store engaged in the following transactions for 2014. Sales tax of 7 percent is collected on all sales. 1. Book sales, not
- West Virginia State University has a policy of hiring students to work in its bookstores and cafeterias. Assuming that 138 students work for the university at minimum wage rates, what is the amount of
- Bob bender has developed and copyrighted tutorial software for students in advanced accounting. He agrees to sell the copyright to Campus micro systems for eight annual payments of $6,000 each.The pay
- Maria Turner has just graduated from college with a degree in accounting. She had planned to enroll immediately in the master's program at her university but has been offered a lucrative job at a well
- The ACC Tutoring Service provides tutoring to accounting students. The volume of tutoring is low at the beginning of the semester and increases before exams. ACC had its highest level of service in Ma
- Mr. Henley is exploring options to reduce the annual bookkeeping costs. Option 1: Renegotiate the current contract with the bookkeeping service to pay a flat fee of $10,473 per year plus $1 per customer per month. Option 2: Hire a part-time bookkeeper f
- The University of Wisconsin requires all of its students to pay, as part of their tuition, a student activity fee. Those fees are used to support campus clubs and activities. Some students who objecte
- Sasha, age 19, is a full-time student at State College and a candidate for a Bachelor's Degree. During 2015 she received the following payments: State Scholarship for Ten (10) Months (Tuition And Books) $3, 600 Loan From College Financial Aid Office 1,50
- J James Book Publishers is trying to decide whether to offer a 3 cash discount for payments made within 10 days making its new terms 310 net 30
- Your friend just informed you that her grandmother has offered to give her either $5,500 at the end of each of the next five years to help pay tuition (option 1), or $30,000 after she graduates five y
- My grandchild will be attending Pace Law School in New York; four-year college, in the year 2036. The college tuition and fees for 2015 -2016 is $45,624 per year. According to the College Board's Tren
- Judy Thomas has a $1,500 overdue debt for medical books and supplies at Joe's Bookstore. She has only $800 in her checking account and doesn't want her parents to know about this debt. Joe's tells her
- An alumnus has donated $4,000,000 to the Poole College of Management. The College plans to invest this donation in an account earning 10% compounded annually for at least five years before using the donation for student scholarships. If the College would
- John Rider wants to accumulate $65,000 to be used for his daughter's college education. He would like to have the amount available on December 31, 2023. Assume that the funds will accumulate in a cert
- John Rider wants to accumulate $50,000 to be used for his daughter's college education. He would like to have the amount available on December 31, 2023. Assume that the funds will accumulate in a cert
- The college campus bookstore uses a periodic inventory system. The bookstore purchases 445 copies of a textbook at $70 each in June, 975 copies in August at $72 each, and 610 copies in December at $75 each. The bookstore sold 1,870 copies of the textbook
- Barnes and Noble had the following transactions during July of 2016: July 5: Sold $20,000 worth of books to Kruger Books on account at a price of $25 each. Terms 2/10, net 30. The books cost Barnes and Noble $15 each. Barnes and Noble uses a perpetual inv
- Kate is considering going into business producing music books to sell to elementary schools. She has an offer from a publication firm that will charge her a $5,000 setup fee and $1.50 per book. She estimates that she can sell each book for $4.00. Prepare
- Kate is considering going into business producing music books to sell to elementary schools. She has an offer from a publication firm that will charge her a $5,000 setup fee and $1.50 per book. She estimates that she can sell each book for $4.00. What is
- Jo quit her job at Umass where she earned $85,000 a year. She cashed in $200,000 in corporate bonds that earned 3% interest annually to set up a gym. Jo has decided to buy a storefront and set up exercise classes. There are 800 people who will pay $1000 a
- A student fails a course at his university. Which of these is most likely to be the cause of the problem and not a symptom of this problem? a. An angry student. b. The student gets placed on probation. c. The student s mother pays an angry visit to the de
- Kate is considering going into business producing music books to sell to elementary schools. She has an offer from a publication firm that will charge her a $5,000 setup fee and $1.50 per book. She estimates that she can sell each book for $4.00. Assume t
- Kate is considering going into business producing music books to sell to elementary schools. She has an offer from a publication firm that will charge her a $5,000 setup fee and $1.50 per book. She estimates that she can sell each book for $4.00. Assume
- Jarrod receives a scholarship of $28,000 from Riggers University to be used to pursue a bachelor's degree. He spends $16,800 on tuition, $1,400 on books and supplies, $5,600 for room and board, and $4,200 for personal expenses.
- An alumnus has donated $4,000,000 to the Poole College of Management. The College plans to invest this donation in an account earning 10% compounded annually for at least five years before using the donation for student scholarships. Rounded to the neares
- A generous university benefactor has agreed to donate a large amount of money for student scholarships. The money can be provided in one lump-sum of $10 mln, or in parts, where $5.5 mln can be provided in year 1, and another $5.5 mln can be provided in ye
- Suppose that your tuition to attend college is $16,000 per year and you spend $6,000 per year on room and board. If you were working full time, you could earn $20,000 per year. What is your opportunity cost of attending college for one year? A) $22,000
- A private college has received a multi-year unconditional pledge from a major supporter. How will the college report the pledge in its financial statements?
- Mann, Inc., which owes Doran Co. $600,000 in notes payable with accrued interest of $54,000 is in financial difficulty. To settle the debt. Doran agrees to accept from Mann equipment with a fair value of $570,000, an original cost of $840,000, and accumul
- Mann, Inc., which owes Doran Co. $600,000 in notes payable with accrued interest of $54,000, is in financial difficulty. To settle the debt, Doran agrees to accept from Mann equipment with a fair value of $570,000, an original cost of $840,000, and accumu
- Mann, Inc., which owes Doran Co. $1,000,000 in notes payable with accrued interest of $90,000, is in financial difficulty. To settle the debt, Doran agrees to accept Mann equipment with a fair value of $950,000, an original cost of $1,400,000, and accumul
- Mann, Inc., which owes Doran Co. $800,000 in notes payable with accrued interest of $72,000, is in financial difficulty. To settle the debt, Doran agrees to accept from Mann equipment with a fair value of $760,000, an original cost of $1,120,000, and accu
- A computer with software costs $2,917, and Catherine Stevens has agreed to pay a 15% per year finance charge on cash price. If she contracts to pay the loan in 18 months, how much will she pay each month?
- A college uses advisors who work with all students in all divisions of the college. The most useful allocation basis for the salaries of these employees would likely be: a. number of classes offered in each division. b. student graduation rate. c. squa
- Kate is considering going into business producing music books to sell to elementary schools. She has an offer from a publication firm that will charge her a $5,000 setup fee and $1.50 per book. She estimates that she can sell each book for $4.00. How many
- The Rebel Book Store sells books and other supplies to students in a state where the sales tax rate is 7 percent. The Rebel Book Store engaged in the following transactions for 2014. Sales tax of 7 pe
- John Rider wants to accumulate $90,000 to be used for his daughter's college education He would like to have the amount available on December 31, 2021. Assume that the funds will accumulate in a certi
- Ricardo is a professional football player. In negotiating his contract for the upcoming season, Ricardo is given two options. He can receive (1) 12 monthly checks of $325,000 with no deferred payments or (2) $250,000 monthly with the $900,000 balance plac
- Elizabeth College, a small private college, had the following transactions in the fiscal year 2017. 1. Gross tuition and fees revenue totaled $5,600,000. Tuition waivers and scholarships of $346,000 were granted. Of the tuition waivers granted $276,400 w
- Jena is a full-time student at State University and is claimed by her parents as a dependent. Her only source of income is a $6,000 scholarship ($400 for books, $3,000 tuition, $200 athletic fee, and $2,400 room and board). Jena's gross income for the yea
- Loris purchased educational saving bonds to help finance her son's education. She paid $4,000 for the bonds. The bonds matured at $6,000 and the son used $2,500 to pay his tuition for the first semester. The son quit school after one semester and Lori
- Tutor Tots performs tutoring services on account, so virtually all cash receipts arrive by mail and are then placed in the petty cash box for a week. Average daily cash receipts are $24,000. Jennifer Swanson, the owner, has just returned from a meeting wi
- Kate is considering going into business producing music books to sell to elementary schools. She has an offer from a publication firm that will charge her a $5,000 setup fee and $1.50 per book. She estimates that she can sell each book for $4.00. If Kate
- 1. The hospital has a contractual agreement with a lender requiring that $500,000 in cash be set aside to meet its future debt payment. 2. The hospital accrued $1,500,000 in patient service revenues.
Explore our homework questions and answers library
Browse
by subject