VIPSolutions

VIPSolutions logo ✨ VIPSolutions

Home Dashboard Ask AI Archive

give answer in 2 step with explanation at the end of each step and final answer at the end:Complete two amortization tables. Follow these instructions (meant to make sure you can use excel). Create each table on a separate worksheet (not file) . Name each worksheet Ord ann Ann due. assume the following: 10 - year lease payments of 5,000 happen quarterly The annual market rate of interest is 6% There is a bargain purchase option (BPO) of $30,000 The first 5 lines of the worksheet should have the following information with labels in column A and the numerical value (or formula to calculate the numerical value in column B. Number of compounding periods Principal amount Interest Rate (adjusted to periodic amount) Quarterly payment Calculation of the pv of the annuity and the BPO. You can do this in two formulas or one, your choice. If you use two, add these together. The table shall contain 5 columns beginning after row 5. Col 1: Beginning Book Value Col 2: Interest Expense Col 3: Cash flow or payment Col 4: Reduction in Principal Col 5: Ending book value There should be nothing in the worksheet except formulas which will reference back to one of the calculations or inputs in rows 1-5. For example, your calculation of interest expense in the table will be a formula that references back to the cell address where you entered the principal amount and the relevant interest rate. Using an "absolute reference” will make this easier for some of the work. Look that up in the help function if you don't know what that means. I will grade this by changing any value in rows 1-5. To get full credit, the entire worksheet should update accurately using the new values input in rows 1-5. Thus, the worksheet should work for any value in rows 1-5. For the worksheet Ord ann, you assume that the cash flow occurs at the end of each compounding period. For the worksheet Ann Due, you assume that the cash flow occurs at the beginning of each compounding period. The example from the class was an annuity due. You can create a table for the annuity due, copy the work to the second worksheet and modify it some to be applicable for an ordinary annuity. Your last row, the last column should equal to zero if you have done the table correctly.

Question:

give answer in 2 step with explanation at the end of each step and final answer at the end:Uploaded ImageComplete two amortization tables. Follow these instructions (meant to make sure you can use excel). Create each table on a separate worksheet (not file) . Name each worksheet Ord ann Ann due. assume the following: 10 - year lease payments of 5,000 happen quarterly The annual market rate of interest is 6% There is a bargain purchase option (BPO) of $30,000 The first 5 lines of the worksheet should have the following information with labels in column A and the numerical value (or formula to calculate the numerical value in column B. Number of compounding periods Principal amount Interest Rate (adjusted to periodic amount) Quarterly payment Calculation of the pv of the annuity and the BPO. You can do this in two formulas or one, your choice. If you use two, add these together. The table shall contain 5 columns beginning after row 5. Col 1: Beginning Book Value Col 2: Interest Expense Col 3: Cash flow or payment Col 4: Reduction in Principal Col 5: Ending book value There should be nothing in the worksheet except formulas which will reference back to one of the calculations or inputs in rows 1-5. For example, your calculation of interest expense in the table will be a formula that references back to the cell address where you entered the principal amount and the relevant interest rate. Using an "absolute reference” will make this easier for some of the work. Look that up in the help function if you don't know what that means. I will grade this by changing any value in rows 1-5. To get full credit, the entire worksheet should update accurately using the new values input in rows 1-5. Thus, the worksheet should work for any value in rows 1-5. For the worksheet Ord ann, you assume that the cash flow occurs at the end of each compounding period. For the worksheet Ann Due, you assume that the cash flow occurs at the beginning of each compounding period. The example from the class was an annuity due. You can create a table for the annuity due, copy the work to the second worksheet and modify it some to be applicable for an ordinary annuity. Your last row, the last column should equal to zero if you have done the table correctly.

This is AI generated Response.
Asked by: Aman Kori
Created at: 2025-10-14 15:15:48

Final Answer:

Rendered Raw Text
Did you like this answer?
# Step 1: Set Up the Inputs and Calculate Present Value **Inputs (Rows 1–5):** - **Number ofounding Periods:** 10 years × 4 quarters per year = **40 periods** *(Explanation: Quarterly compounding means four payments per year for ten years.)* - **Principal Amount:** This is the present value we need to calculate. - **Interest Rate (Periodic):** Annual rate = 6% Periodic rate = 6% ÷ 4 = **1.5% per quarter** *(Explanation: Divide annual rate by the number of periods per year.)* - **Quarterly Payment:** Given as **$5,000 per period** - **Bargain Purchase Option (BPO):** Given as **$30,000 at the end** **Calculation of Present Value (PV):** *For Ordinary Annuity (Ord ann):* PV = [PMT × (1 - (1 + r)^-n) / r] + [BPO / (1 + r)^n] Where: - PMT = $5,000 - r = .015 - n = 40 - BPO = $30,000 Plug in the numbers: Annuity PV = 5,000 × (1 - (1 + .015)^-40) / .015 BPO PV = 30,000 / (1 + .015)^40 **Step 1 Explanation:** This sets up the structure of the worksheet and calculates the amount to be amortized based on the present value of all future cash flows, discounted at the market rate of interest. --- # Step 2: Set Up the Amortization Table **Table Columns (after Row 5):** 1. **Beginning Book Value** 2. **Interest Expense** (Beginning Book Value × Periodic Interest Rate) 3. **Cash Flow or Payment** ($5,000 for periods 1–40; $30,000 as the BPO in the last period) 4. **Reduction in Principal** (Payment - Interest Expense) 5. **Ending Book Value** (Beginning Book Value - Reduction in Principal) **Table Construction:** - For each period, use formulas to reference the inputs and prior period’s ending book value. - Interest expense is calculated each period on the beginning book value. - The reduction in principal is how much of the payment goes toward reducing the lease liability. - The ending book value becomes the next period’s beginning value. - In the last period, the ending book value should be zero if calculations are correct. **Step 2 Explanation:** Filling in the table row by row in Excel will allow you to see how the lease liability is reduced over time through periodic payments and the final BPO payment, ensuring the worksheet updates automatically. --- # **Final Answer (Summary):** 1. **Calculate the Present Value** of lease payments and the BPO using the formulas above and set up all required inputs (number of periods, rate, payment, BPO). 2. **Build the Amortization Table** using Excel formulas, referencing your inputs, and ensure the ending balance after the final payment is zero. **If you follow these steps and set up the worksheet as described, your table will correctly amortize the lease liability for both Ordinary Annuity and Annuity Due scenarios.**

📢 Instructions:

  • Ask anything relatd to above question only.
  • For new Question goto :
    Ask AI

Related Answers

Study Help, Fast Answers

VIPSolutions focuses on clear, step‑by‑step explanations so you can learn quickly. Whether you need an AI‑generated walkthrough or a short hint to get unstuck, each solution is organized for fast reading and easy review later.

Search similar questions, compare approaches, and bookmark the best answers for revision. Our goal is simple: quick, reliable study help that feels natural—not noisy.