PLEASE ANSWER MY QUESTIONS PROPERLY WITH SOLUTIONTHANK YOU Y

PLEASE ANSWER MY QUESTIONS PROPERLY WITH SOLUTION-THANK YOU

You have just leased a car that has monthly payments of $305 for the next 4 years with the first payment due today. If the APR is 5.4 percent compounded monthly, what is the value of the payments today? O $13,140.36 $13,552.85 $11.999.54 O $13,199.49 $12,858.49

Solution

Answer to Question 1:

Monthly Payment = $305
Period = 4 years or 48 months
Annual Interest Rate = 5.4%
Monthly Interest Rate = 0.45%

Present Value of Payments = $305 + $305/1.0045 + $305/1.0045^2 + ... + $305/1.0045^47
Present Value of Payments = $305 * 1.0045 * (1 - (1/1.0045)^48) / 0.0045
Present Value of Payments = $305 * 43.2770
Present Value of Payments = $13,199.49

Answer to Question 2:

Quarterly Payment = $1,300
Period = 21 years or 84 quarters
Quarterly Interest Rate = 0.93%

Present Value of Payments = $1,300/1.0093 + $1,300/1.0093^2 + $1,300/1.0093^3 + ... + $1,300/1.0093^84
Present Value of Payments = $1,300 * (1 - (1/1.0093)^84) / 0.0093
Present Value of Payments = $1,300 * 58.1170
Present Value of Payments = $75,552.06

Answer to Question 3:

Decrease in Accounts Receivable = $26,650 - $24,440
Decrease in Accounts Receivable = $2,210

Increase in Accounts Payable = $40,560 - $39,170
Increase in Accounts Payable = $1,390

Increase in Inventory = $22,820 - $18,930
Increase in Inventory = $3,890

Use of Cash = Increase in Inventory - Decrease in Accounts Receivable - Increase in Accounts Payable
Use of Cash = $3,890 - $2,210 - $1,390
Use of Cash = $290

Answer to Question 4:

Cash Cycle = Operating Cycle - Accounts Payable Period
Cash Cycle = 54.2 days - 37.1 days
Cash Cycle = 17.1 days

Operating Cycle = Inventory Period + Accounts Receivable Period
Operating Cycle = 22.5 days + 31.7 days
Operating Cycle = 54.2 days