ACCT251E6-18Sol - R = $3,423,792 The recommended method of...

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EXERCISE 6-18 (10–15 minutes) Time diagram: i = 8% PV – OA = ? $400,000 $400,000 $400,000 $400,000 $400,000 0 1 2 13 14 15 n = 15 Formula: PV – OA = R (PVF – OA n, i ) PV – OA = $400,000 (PVF – OA 15, 8% ) PV – OA = $400,000 (8.55948)
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Unformatted text preview: R = $3,423,792 The recommended method of payment would be the 15 annual payments of $400,000, since the present value of those payments ($3,423,792) is less than the alternative immediate cash payment of $3,500,000....
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