ACT3391Spring2011TraditionalHomeworkChs5,6&7solution17to20

ACT3391Spring2011TraditionalHomeworkChs5,6&7solution17to20

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Unformatted text preview: HOMEWORK Spring 2011 ACT3391 17. (1 point) Assume on 12-31-10 Troy Company entered into an agreement that required Troy to pay a vendor $10,000,000 on 12-31-14. Further assume that the appropriate market rate of interest for Troy was 4%. As of 12-31-10, what was the present value of Troys 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 12-31-10 Halik Company entered into an agreement that required Halik to pay a supplier $100,000 every year until 2028. Haliks first payment of $100,000 was scheduled to take place on 12-31-11. Further assume that the market rate of interest for Halik is 8%. As of 12-31-10, what was the present value of Haliks 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 12-31-11 George Company entered into an agreement that allowed George to collect the...
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This note was uploaded on 03/08/2011 for the course ACCT 3391 taught by Professor Turpin during the Spring '10 term at Troy.

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