# 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.
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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