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Chapter 6 HW - Answers to Homework Assignment for Chapter 6...

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Answers to Homework Assignment for Chapter 6 E6-5 Using Table 6-5: Present Value of an Annuity Due ( a ) $50,000 x 4.96764 = $248,382 ( b ) $50,000 x 8.31256 = $415,628 ( c ) $50,000 x (5.65022 - 4.11141 = 1.53881) = $76,940.50 E6-6 Using Table 6-1: Future Value of a Single Sum ( a ) Future Value of $12,000 @ 10% for 10 years, ($12,000 x 2.59374 = $31,124.88) ( b ) Future value of an ordinary annuity of $620,000 at 10% for 15 years ($620,000 x 31.77248 = $19,698,938) Deficiency ($20,000,000 - $19,698,938 = $301,062) ( c ) $75,000 discounted at 8% for 10 years: $75,000 x .46319 = $34,739.25 Accept the bonus of $40,000 now. E6-12 Building A - PV = $610,000. Building B - Rent x (PV of annuity due of 25 years at 12%) = PV $70,000 x 8.78432 = PV $614,902.40 = PV Building C - Rent x (PV of ordinary annuity of 25 periods at 12%) = PV $6,000 x 7.84314 = PV $47,058.84 = PV Cash purchase price of Building C: $650,000.00 PV of rental income: ($47,058.84) Net present value (PV): $602,941.16 Therefore, Brubaker, Inc should lease Building C since its present value of its net cost is the smallest.
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P6-1 ( a ) PV = ? i = 9% FV = $240,000 n = 3 years PV = $240,000 (.77218) (using table 6-2: Present value of single sum) Cash equivalent price of building: $185,323.20 Less book value ($250,000 - $100,000): $150,000.00 Gain on disposal of building: $35,323.20 ( b ) Time Diagram i = 11% Principal $300,000 Interest PV-OA=? $27,000 $27,000 $27,000
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