Financial accounting
E9-15; E9-16; E9-17; E9-18; E9-19; E9-20; E9-21; P9-11
E9-15
PV= 50,000 (1.10)^-3
15,000 (5.9713)
37,565
Truck
37,565
Note payable
37,565
Interest expense
3,756.5
Note payable
3,756.5
E9-16
Option 1: Collect $50,000 today
Option 2: receive 10,100 per year for the next seven years
Earn 10% on investments
50,000 today or present value of option 2=
Year 1 10,100 x .9091
Year 2 10,100 x .8264
Year 3 10,100 x .7513
Year 4 10,100 x .6830
Year 5 10,100 x .6209
Year 6 10,100 x .5963
Year 7 10,100 x .5132
= 49,492
TAKE THE MONEY TODAY! the present value of option 2 is less than option 1
E9-17
You are working with a client who wants to retire in eight years. The client has a savings account with a
local bank that pays 9% and she wants to deposit an amount that will prove her with $900,000 when she
reitres. Currently, she has $200,000 in the account. How much additional money should she deposit now
to provide her with $900,000 when she retires?
200,000 (5.5384) =1,107,680… she doesn’t need to deposit any more money