HOMEWORK
–
Spring 2011
–
ACT3391
17.
(1 point)
Assume on 123110 Troy Company entered into an agreement that required Troy to pay a vendor
$10,000,000 on 123114.
Further assume that the appropriate market rate of interest for Troy was 4%.
As of 123110,
what was the present value of Troy’s obligation?
PV lump sum
n = 4
i = 4%
FV = $10,000,000
PV = $10,000,000 x 0.85480 = $8,548,000
Note that using a calculator results in $8,548,042 – the $42 difference is not material
18.
(1 point)
Assume that on 123110 Halik Company entered into an agreement that required Halik to pay a supplier
$100,000 every year until 2028.
Halik’s first payment of $100,000 was scheduled to take place on 123111.
Further
assume that the market rate of interest for Halik is 8%.
As of 123110, what was the present value of Halik’s obligation?
PVOA
n = 18
i = 8%
pymt = $100,000
PV = $100,000 x 9.37189 = $937,189
Note that using a calculator also results in $937,189
19.
(4 points)
Assume that on 123111 George Company entered into an agreement that allowed George to collect the
following amounts:
Starting 123112, $500,000 every 1231 until 2017
On 123118 a onetime collection of $400,000
Starting 123119, $300,000 every 1231 until 2044
•
How much total cash will George eventually collect?
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 Spring '10
 Turpin
 Accounting, Time Value Of Money, PV Lump Sum

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