Prob 6-6

# years 15 years 610 years 1120 re quire d 8 10 12

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Unformatted text preview: Years 6–10 Years 11–20 Re quire d: 8% 10% 12% ezto.mhecloud.mcg r aw- hill.com/hm_accounting .tpx?todo= pr intviewSing le 1/2 2/25/14 Assig nment Pr int View Re quire d: W hat is the max imum amount the Claus s ens s hould pay John Duggan for the hardware s tore? (As s ume that all c as h flows oc c ur at the end of the y ear.) PV of \$70,000 ca sh flow Years 1-5 \$ PV of \$400,000 se lling price M a x i m um pa i d for store 279,490+/ -0 .1 % Years 6-10 180,595+/ -0 .1 % Years 11-20 167,139+/ -0 .1 % Year 20 Total 54,424+/ -0 .1 % \$ 627,224 +/ -0 .1 % + \$ 54,424 +/ -0 .1 % = \$ 681,648 +/ -0 .1 % Explanation: The max imum amount that s hould be paid for the s tore is the pres ent value of the es timated c as h flows . Years 1-5: PVA = \$70,000 × 3.99271* = \$279,490 *Pres ent value of an ordinary annuity of \$1: n = 5, i = 8% (from PVA of \$1) Years 6-10: PVA = \$70,000 × 3.79079* = \$265,355 *Pres ent value of an ordinary annuity of \$1: n = 5, i = 10% (from PVA of \$1) PV = \$265,355 × 0.68058* = \$180,595 *Pres en...
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## This homework help was uploaded on 03/22/2014 for the course ACC 3000 taught by Professor He during the Fall '09 term at CUNY Baruch.

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