Accounting

Davidsmeier Corporation just sold inventory with a cost of $150,000. In exchange for the inventory, Davidsmeier received $40,000 cash and a note promising to pay $250,000 in five years (there is no interest rate specified on the note).

A. How much profit did Davidsmeier make on this sale if it usually loans money at 10 percent interest compounded annually?

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B. How much profit did Davidsmeier make on this sale if it usually loans money at 12 percent interest compounded annually?

C. How much profit did Davidsmeier make on this sale if it usually loans money at 8 percent interest compounded annually?

D. Explain how the interest rate assumed on a note like this affects the income of the company.

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