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Unformatted text preview: PROBLEM 67 (a) Time diagram (alternative one): i = ? $600,000 $80,000 $80,000 $80,000 $80,000 $80,000 0 1 2 10 11 12 n = 12 8.09%. PV = 600000 PMT = 80000 FV = 0 n = 12 i = ? Time diagram (alternative two): i = ? PV = $600,000 FV = $1,900,000 0 1 2 11 12 n = 12 10.08%. PV = 600000 PMT = 0 FV = 1900000 n = 12 i = ? Dubois should choose alternative two since it provides a higher rate of return. (b) Time diagram: i = ? ($824,150 – $200,000) PV – OA = R = $624,150 $76,952 $76,952 $76,952 $76,952 0 1 8 9 10 n = 10 sixmonth periods 8.00%. PV = 624150 PMT = 76952 FV = 0 n = 10 i = ? i = 4%. The interest rate is 4% semiannually, or 8% annually. (c) Time diagram: i = 5% per six months PV = ? 800000 ? $32,000 $32,000 $32,000 $32,000 $32,000 ($800,000 X 8% X 6/12) 0 1 2 8 9 10 n = 10 sixmonth periods [(7 – 2) X 2] Present value (amount received on sale of note) = $738,226.12 PV = ? PMT = 32000 FV = 800000 n = 10 i = 5% PROBLEM 67 (Continued) (d) Time diagram i = 2 1/2 % per quarter PV = FV $200,000 1300000 12/31/10 12/31/11 12/31/19 12/31/20 n = 40 quarters Quarterly payments = $11,319.87 PV = 200000 FV = 1300000 n = 40 i = 2.5% PROBLEM 79 (a) December 31, 2010 Cash........................................................................Cash....
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 Spring '10
 Erickson
 Time Value Of Money, Payment, ........., Generally Accepted Accounting Principles

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