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ACT3391HomeworkFall2009Solutions15&16

ACT3391HomeworkFall2009Solutions15&16 - HOMEWORK...

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HOMEWORK - Fall 2009 – Chapters 1 through 7 ALL homework assignments must be completed by using some type of computer software program, e.g., word, excel. YOU WILL NOT RECEIVE FULL CREDIT FOR THE HOMEWORK UNLESS IT IS COMPLETED BY USING A COMPUTER. NO CREDIT WILL BE GIVEN FOR LATE HOMEWORK. When completing your homework assignments DO NOT use any abbreviations, e.g., spell out Governmental Accounting Standards Board instead of simply writing GASB. 15. (2 points) Assume that on 12-31-07 Zinc Company made a sale that allowed Zinc to collect $400,000 every December 31 with the first collection happening on 12-31-10 and the last collection happening on 12-31-25. Assume the appropriate market rate of interest is 4.75%. As of 12-31-07, what is the present value of Zinc’s receivable? PV of a deferred annuity ( remember that there are different ways to solve for the PV of a deferred annuity ) First, using Table 6-4 to find PVOA, n = 16 & i = 4.75%: $400,000 x 11.03323 = $4,413,292 Second, using Table 6-2 to the PV of $4,413,292, n = 2 (12-31-07 to 12-31-09: 2009 is one
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