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Financial accounting
E915; E916; E917; E918; E919; E920; E921; P911
E915
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
E916
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
E917
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
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 '07
 DDITTMAN

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