Payment example

A positive value of any term in Eq. (9-177) implies an increase in working capital, and a negative value a decrease. For example, the sale of fixed assets such as plant, buildings, land, etc., is a source of cash, and the purchase of fixed assets uses up cash. Similarly, an increase in financial resources in the form of loans and stock and bond issues is a source of cash, and a decrease in financial resources in the form of repayment of loans, retirement of stocks and bonds, and the payment of cash dividends uses up cash. (Note that a stock dividend as opposed to a cash dividend does not use up cash.)... 

Transactions that change the character of the net working capital but do not affect its value occur in a company. For example, a cash payment of 10,000 for accounts payable reduces both the current asset of cash by 10,000 and the current liabihty of accounts payable by 10,000, leaving the net working capital unchanged. However, this transac tion affects Doth the current and the quick ratios. 

The calculation of interest is usually based on the outstanding loan amount. For example, semi-annual payments are expected, the amount of the first year s interest (I) would be ... 

In considering either multiple payments or cash into and out of a company, the present values are additive. For example, at 6 percent interest, the present value of receiving both 1,000 in one year and 1,000 in three years would be 943.40 + 839.62 = 1,783.06. Similarly, if one were to receive 1,000 in one year, and pay 1,000 in 3 years the present value would be 943.40 - 839.62 = 103.78. It is common practice to compare investment options based on the present-value equation shown above. We may also apply one or all of the following four factors when comparing investment options Payback Period Internal Rale of Return Benefit-to-cost Ratio and Present Value of Net Benefit. But as we will see later, it is rate of return that is usually the most enlightening when considering an investment. 

If the PPE is personal in nature and can be used by the employee off the job, the payment issue may be left up to labor and management. Examples cited in the memorandum include safety shoes, nonspecialty safety glasses, and cold-weather gear. OSHA makes it clear that, If shoes and cold-weather gear is subject to contamination of hazardous substances and cannot be safely worn off-site it should be paid for by the employer. ... 

A dollar that will be received a year from today has a present value of I divided by (1+r), where r is the discount rate, which is equal to the opportunity cost of capital and a dollar that will be received two years from today has a present value of 1 divided by (1+r)(1+r) or (1+r)f A payment that is to be received t years from today must be divided by (1 +r). If the opportunity cost of capital is fairly high, savings that will be realized many years from today will be heavily discounted. For example, if r is 10 percent, the present value of a dollar that will he received seven years from today is about 51 cents. If a dollar will be received twenty-five years from today, its present value is not even a dime. The total value of the tunnel that saves 1 million per year indefinitely is only 1 million divided by r. If the opportunity cost of capital is 10 percent, the tunnel is worth only 10 million. The economy will not prosper if it sinks 1 billion in building a tunnel that will generate only 10 million of benefits. 

The distinction can be made between horizontal and vertical equity. Horizontal equity is the equal treatment of equals individuals with the same needs should receive equivalent amounts of care or support, or individuals with the same personal means (for example, in relation to income or wealth) should bear equal burdens of funding. Vertical equity is the differential allocation of treatments or outcomes to individuals with different needs, or a differential burden of payment such as a progressive tax. Targeting services on needs is the most common example of the pursuit of greater equity, and it is therefore also legitimate to question the efficiency with which equity is pursued. 

The problem with the payout period is that it does not consider the timing of the payments or the profits earned by the plant after the payout period is over. To illustrate the importance of the former, suppose a plant has the same prestartup expenses as the one in Example 10-3. Assume it has a profit of 5,000,000 per year for the first 5 years and from then on earns 7,000,000 per year. The payout time for this plant is 5 years, the same as for the plant in Example 10-3. The return on investment of the two mature plants is the same. Yet this proposed plant has a definite advantage over the one in Example 10-3. This is illustrated in the following example. 

Even when the interest terms are clearly stated, it often takes some calculations to determine which proposition is best. The next example illustrates the importance of the timing of interest payments. 

Same values of the denominator are given in Tables 10-7 and 10-8. These are used in Example 10-10 to determine the yearly and monthly payments for a mortgage. 

Example if 20,000 is borrowed on a 25-yeai loan at 8% per year the payment per year is... 

All of the equations developed in this section assume that payments are made at the beginning of a period and interest is calculated at the end of the period. The bank in Example 10-9 would probably ask for the interest at the time the payment is made. This is not uncommon. If this is the case, different formulas must be developed for the various annuities. 

In the last example an average figure was given for utilities. This is usual even though it is realized that the amount of these items used varies with the seasons. Some economists like to compound daily, since utilities are constantly is use. This is not reasonable, because payments to utilities companies or fuel suppliers are usually made on a monthly basis. For plant design evaluations the accuracy of the figures usually does not warrant even compounding semiannually. 

The NPV for plant 2 is better than that for plant 1 by 824,000. This could also be calculated by finding the net present value of the savings in interest payments. These are given in Example 1 0-4. 

We define the co-insurance rate or co-payment rate as the (fixed) percentage of the sum that insurees are required to pay out of their own pocket at the moment of purchase. For example, in Spain it is 40 per cent for the employed and for the great majority of listed pharmaceuticals. Some authors use the term co-payment to mean the fixed sum per package that is paid by the user, independently of the price. 

The first addend is positive, and measures the direct effect of the rise of the co-payment rate. It expresses the effect of the normative change in the distribution of the financial burden between the two parties, before the user s reaction of restraint in the use of the pharmaceutical is taken into consideration. The other two addends are negative, and quantify the decrease in expenditure caused by the drop in consumption as a reaction to the rise in the price paid. The balance can have either sign, depending on the elasticity of demand and the size of the increase in the co-payment. In the example shown in Figure 7.3, despite a considerable decrease in the quantity consumed, the patient will end up paying more for the drag than before. 

For income tax purposes, you can calculate the principal and interest in each payment. For example, at the end of the first month, the interest paid is 35,000 (0.008750) - 306.25 and the principal paid is 325.00 - 306.25 — 18.75, so that the principal balance for the next month s interest calculation is 34,981.25. Iteration of this procedure (best done on a computer) yields the amortization schedule for the loan. 

Suppose you are asked to evaluate the purchase of the multicone cyclone referred to in Example 3.4. The capital investment is 35,000 (see Example 3.4), and the equipment has a class life of 5 years, after which it will be sold for the salvage value of 4000. The income stream generated by the machine is on line A in Tables EB.5A and EB.5B. As the equipment ages, its operating and maintenance costs increase, and line B lists the expense profile. Assume a tax rate of 35 percent with no investment tax credit. Evaluate two possible scenarios (a) 100 percent use of equity and (b) 100 percent debt financing. Use straight-line depreciation for debt financing, for simplicity assume equal annual payments (principal plus interest) to the lender for the 5 years at a rate of 10.5%. 

The actions in a collaboration do not observe the same invariants as the actions they refine. For example, when we look at a transaction between a shop and a customer at abstraction sufficient to see purchases, we believe in the invariant that the amount in the vendor s till plus the value of the stock should always add up to the same amount Every sale simply swaps some stock for some money. But when we look in more detail, we can see that the money is transferred separately from the goods, so there are periods between payment and delivery when the invariant is not observed. Nevertheless, this layer still has its own invariants—for example, that the total of the vendor s and the customer s cash is always the same. 

Connectors hide complex collaborations. The stream of payment orders from Payment Control probably requires a buffer along with a signaling mechanism to tell the receiving component to pick up the orders. The stream of invoices from Purchasing follows the same pattern. The continous update of the Meter s value from the Motor s speed requires a change-notification message other values transmitted in that example need the same message. 

If this is a subsystem within a larger design, much of this work may already be done. Otherwise, we begin by understanding how our system works within a larger system to meet some larger objectives. For example, if we are asked to write an order payment application, we need first to understand the relevant procedures of the financial department, what role is envisaged for our software, and what functions will be performed by the users themselves, or other pieces of software. 

Do not go overboard with separating actor roles. Specifically, if there are strong dependencies in state or attributes of the actor involved across two actions, do not needlessly split into two actor roles. For example, if the system requests authorization from an external system for a credit card, and follows with an approval request for a payment amount on that same card, it would be better to use a single external role for the authorization system. Similarly, it would not be helpful to distinguish reserver , borrower , and returner as separate roles in a library. Map the user-roles in the system context to roles in the business model perhaps eventually to job descriptions. 

Key passages in Marx s writings that demonstrate the role of the Kalecki principle in relation to the circulation of money are in chapter 17 of Capital, volume 2 (see Sardoni 1989 211). Starting with the case of simple reproduction, Marx considers the circulation of money using the example of an individual capitalist. During the first year he advances a money capital of 5,000, let us say, in payment for means of production ( 4,000) and for... 

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