Chapter 13 Homework Solutions

# Chapter 13 Homework Solutions - Exercise137 1 a...

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Exercise 13-7 1. a. \$400,000 × 0.794 (Exhibit 13-22) = \$317,600. b. \$400,000 × 0.712 (Exhibit 13-22) = \$284,800. 2. a. \$5,000 × 4.355 (Exhibit 13-23) = \$21,775. b. \$5,000 × 3.685 (Exhibit 13-23) = \$18,425. 3. Looking in Exhibit 13-23 Appendix 13A, the factor for 10% for 20 years is  8.514. Thus, the present value of Sally’s winnings would be: \$50,000 × 8.514 = \$425,700. Whether or not Sally really won a million dollars depends on your point  of view. She will receive a million dollars over the next 20 years (\$50,000  × 20 years); however, in terms of its value  right now  she won much less  than a million dollars as shown by the present value computation above.

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Exercise 13-14   1. Amount of Cash  Flows 20% Present Value of  Cash Flows Year(s) X Y Factor X Y 1 \$1,000 \$4,000 0.833 \$  833 \$3,332 2 \$2,000 \$3,000 0.694 1,388 2,082 3 \$3,000 \$2,000 0.579 1,737 1,158 4 \$4,000
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Chapter 13 Homework Solutions - Exercise137 1 a...

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