Question: Morrow Enterprises purchased a building on January 1 2015 in

Morrow Enterprises purchased a building on January 1, 2015, in exchange for a three-year, non-interest-bearing note with a face value of $693,000. Independent appraisers valued the building at $550,125.
a. At what amount should this building be capitalized?
b. Compute the present value of the note’s future cash flows, using the following discount rates:
(1) 6 percent
(2) 8 percent
(3) 10 percent
c. What is the effective interest rate of this note?
d. Explain how one could more quickly compute the effective interest rate on the note.


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  • CreatedAugust 19, 2014
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