Solution 6-134 Present value of $4,000 for 32 periods at 3% ($4,000 × 20.38877) = $81,555. Ex. 6-135—Present value of an investment in equipment. (Tables needed.) Find the present value of an investment in equipment if it is expected to provide annual savingsof $20,000 for 10 years and to have a resale value of $50,000 at the end of that period. Assumean interest rate of 9% and that savings are realized at year end. Solution 6-135 Present value of $20,000 for 10 periods at 9% (6.41766 × $20,000) = $128,353Presentvalue of $50,000 discounted for 10 periods at 9% (.42241 × $50,000) = 21,121Present value of investment in equipment $149,474Ex. 6-136—Future value of an annuity due. (Tables needed.) If $6,000 is deposited annually starting on January 1, 2012 and it earns 9%, how much willaccumulate by December 31, 2021?

To download more slides, ebook, solutions and test bank, visit Accounting and the Time Value of Money 6 - 33Solution 6-136 Future value of an annuity due of $6,000 for 10 periods at 9%($6,000 × 15.19293 × 1.09) = $99,362. Ex. 6-137—Present value of an annuity due.(Tables needed.) How much must be invested now to receive $25,000 for ten years if the first $25,000 is receivedtoday and the rate is 8%? Solution 6-137 Present value of an annuity due of $25,000 for ten periods at 8% ($25,000 × 7.24689) =$181,172. Ex. 6-138—Compute the annual rent. (Tables needed.) Crone Co. has machinery that cost $90,000. It is to be leased for 15 years with rent received atthe beginning of each year. Crone wants a return of 10%. Compute the amount of the annualrent. Solution 6-138 Present value factor for an annuity due for 15 periods at 10% (1.10 ×7.60608) = 8.36669$90,000 ÷ 8.36669 = $10,757. Ex. 6-139—Calculate market price of a bond. (Tables needed.) Determine the market price of a $300,000, ten-year, 10% (pays interest semiannually) bond issuesold to yield an effective rate of 12%. Solution 6-139 Present value of $15,000 for 20 periods at 6% ($15,000 × 11.46992) = $172,049Presentvalue of $300,000 discounted for 20 periods at 6% ($300,000 × .31180) = 93,540Market price of the bond issue $265,589Ex. 6-140—Calculate market price of a bond. On January 1, 2012 Lance Co. issued five-year bonds with a face value of $500,000 and a statedinterest rate of 12% payable semiannually on July 1 and January 1. The bonds were sold to yield10%. Present value table factors are: Present value of 1 for 5 periods at 10% .62092 Present value of 1 for 5 periods at 12% .56743 Present value of 1 for 10periods at 5% .61391 Present value of 1 for 10 periods at 6% .55839

To download more slides, ebook, solutions and test bank, visit 6 - 34 Test Bank for Intermediate Accounting, Fourteenth Edition Present value of an ordinary annuity of 1 for 5 periods at 10% 3.79079 Present value of an ordinary annuity of 1 for 5 periods at 12% 3.60478 Present value of an ordinary annuity of 1 for 10 periods at 5% 7.72173 Present value of an ordinary annuity of 1 for 10 periods at 6% 7.36009 Calculate the issue price of the bonds. Solution 6-140 Present value of $500,000 discounted for 10 periods at 5% ($500,000 × .61391) = $306,955 Present value of $30,000 for 10 periods at 5% ($30,000 × 7.72173) = 231,652Issue price of the bonds $538,607PROBLEMS Pr. 6-141—Present value and future value computations.

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