appc - APPENDIX C Present Value Concepts SOLUTIONS TO BRIEF...

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Appendix C-1 APPENDIX C Present Value Concepts SOLUTIONS TO BRIEF EXERCISES BRIEF EXERCISE C-1 1. 12% 6 2. 8% 20 10% 15 10% 5 4% 24 6% 8 BRIEF EXERCISE C-2 (a) i = 8% ? $30,000 012345678 Discount rate from Table 1 is .54027 (8 periods at 8%). Present value of $30,000 to be received in 8 years discounted at 8% is therefore $16,208.10 ($30,000 X .54027). (b) i = 9% ? $30,000 $30,000 $30,000 $30,000 $30,000 $30,000 0123456 Discount rate from Table 2 is 4.48592 (6 periods at 9%). Present value of 6 payments of $30,000 each discounted at 9% is therefore $134,577.60 ($30,000 X 4.48592).
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Appendix C-2 BRIEF EXERCISE C-3 i = 10% ? $600,000 012345 Discount rate from Table 1 is .62092 (5 periods at 10%). Present value of $600,000 to be received in 5 years discounted at 10% is therefore $372,552 ($600,000 X .62092). Ramirez Company should therefore invest $372,552 to have $600,000 in five years. BRIEF EXERCISE C-4 i = 9% ? $700,000 012345678 Discount rate from Table 1 is .50187 (8 periods at 9%). Present value of $700,000 to be received in 8 years discounted at 9% is therefore $351,309 ($700,000 X .50187). LaRussa Company should invest $351,309 to have $700,000 in eight years. BRIEF EXERCISE C-5 i = 10% ? $36,000 01234 Discount rate from Table 1 is .68301 (4 periods at 10%). Present value of $36,000 to be received in 4 years discounted at 10% is therefore $24,588.36 ($36,000 X .68301). Polley should receive $24,588.36 upon the sale of the note.
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Appendix C-3 BRIEF EXERCISE C-6 i = 8% ? $60,000 0123 Discount rate from Table 1 is .79383 (3 periods at 8%). Present value of $60,000 to be received in 3 years discounted at 8% is therefore $47,629.80 ($60,000 X .79383). Marichal Company should receive $47,629.80 upon issu- ance of the zero-interest bearing note.
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appc - APPENDIX C Present Value Concepts SOLUTIONS TO BRIEF...

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