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 Troy’s obligation?PV lump sumn = 4i = 4%FV = $10,000,000PV = $10,000,000 x 0.85480 = $8,548,000Note that using a calculator results in $8,548,042 – the $42 difference is not material18.(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. Halik’s 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 Halik’s obligation?PVOAn = 18i = 8%pymt = $100,000PV = $100,000 x 9.37189 = $937,189Note that using a calculator also results in $937,18919.(4 points) Assume that on 12-31-11 George Company entered into an agreement that allowed George to collect the following amounts: Starting 12-31-12, $500,000 every 12-31 until 2017On 12-31-18 a one-time collection of $400,000Starting 12-31-19, $300,000 every 12-31 until 2044•How much total cash will George eventually collect?
This is the end of the preview.
access the rest of the document.