Appendix B

# Appendix B - APPENDIXB TimeValueofMoney BRIEFEXERCISEB1(a Interest=pXiXn I=\$5,000X.06X10years I=\$3,000 Accumulatedamount=\$5,000 \$3,000=\$8,000(b

This preview shows pages 1–4. Sign up to view the full content.

APPENDIX B Time Value of Money SOLUTIONS TO BRIEF EXERCISES BRIEF EXERCISE B-1 (a) Interest = p X i X n I = \$5,000 X .06 X 10 years I = \$3,000 Accumulated amount = \$5,000 + \$3,000 = \$8,000 (b) Future value factor for 10 periods at 6% is 1.79085 (from Table 1) Accumulated amount = \$5,000 X 1.79085 = \$8,954.25 BRIEF EXERCISE B-2 1. a. b. 6% 5 periods 2.5% 6 periods 2. a. b. 5% 10 periods 2% 12 periods BRIEF EXERCISE B-3 FV = p X FV of 1 factor = \$10,000 X 1.62889 = \$16,288.90 BRIEF EXERCISE B-4 FV of an annuity of 1 = p X FV of an annuity factor = \$80,000 X 12.57789 = \$1,006,231.20 Appendix B-1

This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document
BRIEF EXERCISE B-5 FV = p X FV of 1 factor + (p X FV of an annuity factor) = \$5,000 X 2.85434 + (\$1,000 X 30.90565) = \$14,271.70 + \$30,905.65 = \$45,177.35 BRIEF EXERCISE B-6 FV = p X FV of 1 factor = \$20,000 X 1.33823 = \$26,764.60 BRIEF EXERCISE B-7 1. 12% 6 10% 15 4% 16 2. 12% 20 10% 5 4% 8 BRIEF EXERCISE B-8 (a) i = 8% = 0 1 2 3 4 5 6 7 8 1 3 5 7 Discount rate from Table 3 is .54027 (8 periods at 8%). Present value of \$10,000 to be received in 8 years discounted at 8% is therefore \$5,402.70 (\$10,000 X .54027). Appendix B-2
(b) i = 9% \$10,000 \$10,000 \$10,000 ? \$10,000 \$10,000 \$10,000 \$10,000 \$10,000 \$10,000 = 0 1 2 3 4 5 6 Discount rate from Table 4 is 4.48592 (6 periods at 9%). Present value of 6 payments of \$10,000 each discounted at 9% is therefore \$44,859.20 (\$10,000 X 4.48592). BRIEF EXERCISE B-9 i = 15% ? = 0 1 2 3 4 5 1 3 5 Discount rate from Table 3 is .49718 (5 periods at 15%). Present value of \$500,000 to be received in 5 years discounted at 15% is therefore \$248,590 (\$500,000 X .49718). Smolinski Company should therefore invest \$248,590 to have \$500,000 in five years. BRIEF EXERCISE B-10 i = 11% = 0 1 2 3 4 5 6 7 8 1 3 5 7 Discount rate from Table 3 is .43393 (8 periods at 11%). Present value of \$875,000 to be received in 8 years discounted at 11% is therefore \$379,688.75 (\$875,000 X .43393). Pizzeria Company should invest \$379,688.75 to have \$875,000 in eight years. Appendix B-3

This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document
This is the end of the preview. Sign up to access the rest of the document.

## This note was uploaded on 04/04/2009 for the course ACC 321 taught by Professor Ahmedmokhtar during the Spring '09 term at Ain Shams University.

### Page1 / 10

Appendix B - APPENDIXB TimeValueofMoney BRIEFEXERCISEB1(a Interest=pXiXn I=\$5,000X.06X10years I=\$3,000 Accumulatedamount=\$5,000 \$3,000=\$8,000(b

This preview shows document pages 1 - 4. Sign up to view the full document.

View Full Document
Ask a homework question - tutors are online