sess16&amp;17req

# 75902 pv ad 5407216 formula for the last ten payments

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Unformatted text preview: VF OAn, i) PV OA = \$400,000 (PVF OA19 9, 10%) PV OA = \$400,000 (8.36492 5.75902) PV OA = \$400,000 (2.6059) PV OA = \$1,042,360 Note: The present value of an ordinary annuity is used here, not the present value of an annuity due. The total cost for leasing the facilities is: \$5,407,216 + \$1,042,360 = \$6,449,576. OR Time diagram for the last ten payments: i = 10% PV = ? R= \$400,000 \$400,000 \$400,000 \$400,000 0 1 2 9 10 17 18 19 FVF (PVFn, i) R (PVF OAn, i) Formulas for the last ten payments: (i) Present value of the last ten payments: PV OA = R (PVF OAn, i) PV OA = \$400,000 (PVF OA10, 10%) PV OA = \$400,000 (6.14457) PV OA = \$2,457,828 (ii) Present value of the last ten payments at the beginning of current year: PV = FV (PVFn, i) PV = \$2,457,828 (PVF9, 10%) PV = \$2,457,828 (.42410) PV = \$1,042,365* *\$5 difference due to rounding. Cost for leasing the facilities \$5,407,216 + \$1,042,36...
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## This note was uploaded on 01/20/2013 for the course ACCOUNTING 301 taught by Professor Gramlich during the Fall '11 term at University of Southern Maine.

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