ACCT251P6-10Sol

# ACCT251P6-10Sol - PROBLEM 6-10 1 Purchase Time diagrams...

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PROBLEM 6-10

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1. Purchase. Time diagrams: Installments i = 10% PV – OA = ? R = \$350,000 \$350,000 \$350,000 \$350,000 \$350,000 0 1 2 3 4 5 n = 5 Property taxes and other costs i = 10% PV – OA = ? R = \$56,000 \$56,000 \$56,000 \$56,000 \$56,000 \$56,000 0 1 2 9 10 11 12 n = 12
PROBLEM 6-10 (Continued) Insurance i = 10% PV – AD = ? R = \$27,000 \$27,000 \$27,000 \$27,000 \$27,000 \$27,000 0 1 2 9 10 11 12 n = 12 Salvage Value i = 10% PV = ? FV = \$500,000 0 1 2 9 10 11 12 n = 12 Formula for installments: PV – OA = R (PVF – OA n, i ) PV – OA = \$350,000 (PVF – OA 5, 10% ) PV – OA = \$350,000 (3.79079) PV – OA = \$1,326,777

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PROBLEM 6-10 (Continued) Formula for property taxes and other costs: PV – OA = R (PVF – OA n, i ) PV – OA = \$56,000 (PVF – OA 12, 10% ) PV – OA = \$56,000 (6.81369) PV – OA = \$381,567 Formula for insurance: PV – AD = R (PVF – AD n, i ) PV – AD = \$27,000 (PVF – AD 12, 10% ) PV – AD = \$27,000 (7.49506) PV – AD = \$202,367 Formula for salvage value: PV = FV (PVF n, i ) PV = \$500,000 (PVF 12, 10% ) PV = \$500,000 (0.31863) PV = \$159,315

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## This document was uploaded on 12/03/2009.

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ACCT251P6-10Sol - PROBLEM 6-10 1 Purchase Time diagrams...

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