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harrison6esolutman_appd

harrison6esolutman_appd - Appendix D Time Value of Money...

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Appendix D Time Value of Money: Future Value and Present Value Appendix Problems (15-20 min.) P D-1 Req. a (accumulating a fund to purchase land) Present value × Future Value of \$1 at 9% for 5 years (Exhibit D-2) = Future value \$100,000 × 1.539 = \$153,900 For 6 years \$100,000 × 1.677 = \$167,700 Req. b (future value of an investment) Annual investment × Future Value of Annuity of \$1 at 6% for 5 years (Exhibit D-4) = Future value \$50,000 × 5.637 = \$281,850 at 8% \$50,000 × 5.867 = \$293,350 Appendix D Time Value of Money: Future Value and Present Value 173

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P D-2 Req. a (relating present and future value) Present value × Future Value of \$1 at 10% for 6 years (Exhibit D-2) = Future value \$5,643,341 × 1.772 = \$10,000,000 Req. b Future value × Present Value of \$1 at 10% for 6 years (Exhibit D-6) = Present value \$10,000,000 × .564 = \$5,640,000 Note: \$5,640,000 \$5,643,341 due to rounding error. Req. c The future value solution in (1) is based on the same equation as the present value solution in (2). Present value X (1 + Interest rate) = Future value Student responses may vary around this basic theme. Financial Accounting
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harrison6esolutman_appd - Appendix D Time Value of Money...

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