MGA 301 Study Guide - Final Guide: Time Point

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emeraldcattle339

9 Dec 2018

School

University at Buffalo

Department

Management Accounting

Course

MGA 301

Professor

Chen Jing

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Document Summary

Additional exercise: kristina deposited ,000 on january 1st 2017 into an investment fund that would allow her to withdraw an equal amount of payment of ,973. 81 every year. The first payment is to be withdrawn on january 1st 2018. Assume the annually compounded rate of return for this investment is 9%. How many payments will this investment fund provide: 5, 6, 7, 8, 9. Firstly, you need to determine whether this is an ordinary annuity problem or annuity due problem. Draw a time line to assist your analysis. Pay attention to the time point of pv and the first rent payment. The time point of pv is one period before the first rent payment this is an ordinary annuity problem. Clancey inc. issues ,000,000 of 8% bonds due in 10 years with interest payable at year-end. The current market rate of interest for bonds of similar risk is 8%.

Related Questions

On January 1, 2016, Glanville Company sold goods to OtterCorporation. Otter signed an installment note requiring payment of$15,000 annually for six years. The first payment was made onJanuary 1, 2016. The prevailing rate of interest for this type ofnote at date of issuance was 8%.

Glanville should record sales revenue in January 2016 of:

None of these answer choices is correct.

$90,000.

$74,891.

$69,343.

Yamaha Inc. hires a new chief financial officer and promises topay him a lump-sum bonus four years after he joins the company. Thenew CFO insists that the company invest an amount of money at thebeginning of each year in a 7% fixed rate investment fund to insurethe bonus will be available. To determine the amount that must beinvested each year, a computation must be made using the formulafor:

None of these answer choices is correct.

The future value of an annuity due.

The future value of a deferred annuity.

The future value of an ordinary annuity

Incognito Company is contemplating the purchase of a machinethat provides it with net after-tax cash savings of $92,000 peryear for five years. Interest is 10%. Assume the cash savings occurat the end of each year. (FV of $1, PV of $1, FVA of $1, PVA of $1,FVAD of $1 and PVAD of $1)

a)alculate the present value of the cash savings

purplemosquito873

Part I:
Solve 4 of the following time value of money problems by filling inthe 4 columns to the right of the description.
Be sure to solve 1 problem from each of the following 4 categorieslisted under Problem Types. I have completed the first row as anexample.

Part II:
Discuss how you may use time value of money concepts in yourpersonal life. For example, saving for college tuition orretirement, paying off a car loan or home mortgage. Give specificdetails as to how you would use these formulas for more effectivedecision making. Create 1 description and fill in the table foryour newly created question.

Problem Types:
1 pv = present value of $1
2 fv = future value of $1
3 PVAo = Present Value of an Ordinary Annuity of$1 (payment at end of period)
4 FVAo = Future Value of an Annuity of $1(payment at end of period)

	Description	Type of Problem	Table	Formula	Answer
1	How much money must your rich unclegive you now to finance four years of college, assuming an annualcost of $48,000 and an interest rate of 6% (applied to theprincipal until disbursed)?	Present Value of anordinary Annuity	PVAo	PV = 48,000(3.465)	$166,325.07
2	How much interest would you earn ifyou deposited $300 at 6 percent for 27 months?
3	If you deposit $2,000 in a 5-yearcertificate of deposit at 5.2%, how much will it be worth in fiveyears?
4	How much interest would you pay toborrow $670 for eight months at 12 percent?
5	You wish to borrow $18,000 to buy anew auto-mobile. Rate is 8.6% over five years with monthlypayments. Find the monthly payment.
6	What is the future value of $800 at8 percent after six years?
7	How much would you have in savingsif you kept $200 on deposit for eight years at 8% compoundedsemiannually?
8	You choose to invest $50/month in a401(k) that invests in an international stock mutual fund. Assumingan annual rate of return of 9%, how much will this fund worth ifretiring in forty years?
9	What is the future value of anannual deposit of $230 earning 6 percent for 15years?
10	If you invest $600/Year in a 401(k)that invests in an international stock mutual fund. Assuming anannual rate of return of 9%, how much will this fund worth ifretiring in forty years?
11	What amount would you have in aretirement account if you made annual deposits of $375 for 25 yearsearning 12 percent, compounded annually?
12	What is the present value of $2,200earning 15 percent for eight years?
13	How much money must you set asideat age 20 to accumulate retirement funds of $100,000 at age 65,assuming a rate of interest of 7%?
14	To have $6,000 for a childâseducation in 10 years, what amount should a parent deposit in asavings account that earns 12 percent, compoundedquarterly?
15	If you deposit $2,000 in a 5-yearcertificate of deposit at 5.2% with quarterly compounding, how muchwill it be worth in five years?
16	What is the present value of awithdrawal of $200 at the end of each year for 14 years with aninterest rate of 7 percent?
17	How much would you have to depositnow to be able to withdraw $650 at the end of each year for 20years from an account that earns 11 percent?
18	What would be the annual paymentamount for a $20,000, 10-year loan at 7 percent?

ochremallard624

Please provide the value for each component N= , I=, PV=, FV=,etc so I can learn how to do it in the calculator. thank you

Annuity payment for expected Future Value
6. You wish to retire with $5 Million in 38 years. Youestimate you will earn 8% annually on your

investments. How much must you invest each year in order toreach your goal?a) Ordinary (1st payment made at the end of theyear)b) Due (1st payment made today)

7. You would like to withdraw $80,000 per year duringretirement. You expect to live 20 yearsafter you retire at age 65.How much do you need to have saved by the time you retire if youcan

earn 4% on your funds?

Present Value of an Annuity
8. As part of an agreement for investing in a start-upcompany, you will receive $10,000 at the endof each year for thenext 3 years. If the agreed upon interest rate is 15%, what is theamount of

money you are required to invest.

9. Part A) From the sale of your family property, youwill receive $25,000 today and again eachyear for the next 15years. If the discount rate is 7%, compute the present value ofyour future

payments.Part B) Instead of receiving annual payments, you couldreceive $200,000 lump sum. Should youtake the lump sum instead?

Perpetuity
10. You plan to purchase a small service company. Youanticipate receiving annual cash flows of$60,000 per yearindefinitely. (A) If you require an 8% return on your investment,what is themost you should pay for this company? (B) What is theNPV if you can purchase it for $500,000?

pucerat523

MGA 301 Study Guide - Final Guide: Time Point

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