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HW_12_Solutions

# HW_12_Solutions - of \$800,000 to be received in 5 years...

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Solutions to Homework 12 Due November 30, 2010 Raffaele B. Mari, CPA Econ 25 Econ of Acctg. BRIEF EXERCISE C-3 FV = p X FV of 1 factor = \$8,000 X 1.60103 = \$12,808.24 BRIEF EXERCISE C-4 FV of an annuity of 1 = p X FV of an annuity factor = \$75,000 X 12.57789 = \$943,341.75 BRIEF EXERCISE C-8 (a) i = 10% ? \$30,000 0 1 2 3 4 5 6 7 8 9 Discount rate from Table 3 is .42410 (9 periods at 10%). Present value of \$30,000 to be received in 9 years discounted at 10% is therefore \$12,723 (\$30,000 X .42410). (b) i = 9% ? \$30,000 \$30,000 \$30,000 \$30,000 \$30,000 \$30,000 0 1 2 3 4 5 6 Discount rate from Table 4 is 4.48592 (6 periods at 9%). Present value of 6 payments of \$30,000 each discounted at 9% is therefore \$134,577.60 (\$30,000 X 4.48592).

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Solutions to Homework 12 Due November 30, 2010 Raffaele B. Mari, CPA Econ 25 Econ of Acctg. BRIEF EXERCISE C-9 i = 9% ? \$800,000 0 1 2 3 4 5 Discount rate from Table 3 is .64993 (5 periods at 9%). Present value
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Unformatted text preview: of \$800,000 to be received in 5 years discounted at 9% is therefore \$519,944 (\$800,000 X .64993). Concord Company should therefore invest \$519,944 to have \$800,000 in five years. BRIEF EXERCISE C-13 i = 4% ? \$400,000 Diagram for Principal 0 1 2 3 4 19 20 i = 4% ? \$18,000 \$18,000 \$18,000 \$18,000 \$18,000 \$18,000 Diagram for Interest 0 1 2 3 4 19 20 Present value of principal to be received at maturity: \$400,000 X 0.45639 (PV of \$1 due in 20 periods at 4% from Table 3) . ............................................................. \$182,556 * Present value of interest to be received periodically over the term of the bonds: \$18,000 X 13.59033 (PV of \$1 due each period for 20 periods at 4% from Table 4) . ....................................................................... 244,626* Present value of bonds . .............................................................. \$427,182* *Rounded....
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