ACCT 3001 Chapter : Chapter 6 Class Examples With Solutions

16 views5 pages

azuremammoth471

15 Mar 2019

School

Department

Course

Professor

For unlimited access to Textbook Notes, a Class+ subscription is required.

Document Summary

N=2, compounding rate (ir) = 6%, use table 1. Future value = 2,000 * 1. 1236 = ,247. N=2, ir=8%, use table 1 => factor = 1. 4693. Future value = 1. 4693 * 5,000 = ,347. Your brother buys your used car and offers you three different payment plans: now and /qtr for the next 10 qtrs. Assume your investment opportunity cost is 8% compounded quarterly. Pv = want to solve for present value of ordinary annuity (table iv) N=10, ir=8%/4 = 2% => factor = 8. 9826. Pv of payment stream = 100 * 8. 9826 = . Pv of alternative b = 898 + 250 = ,148 want to solve for present value of a single sum (table ii) Pv of payment due in one year = 600 * 0. 9238 = . Pv of alternative c = 554 + 500 = ,054. You want to buy a new recordable dvd player. The store gives you three different payment options:

Related Questions

Kelly Malone plans to have $48 withheld from her monthlypaycheck and deposited in a savings account that earns 12%annually, compounded monthly. If Malone continues with her plan fortwo and one-half years, how much will be accumulated in the accounton the date of the last deposit? (PV of $1,FV of $1, PVA of $1, andFVA of $1) (Use appropriate factor(s) from the tablesprovided. Round FVA factor to 4 decimal places.)

Periodic Cash Flow	x	f (FV of an OrdinaryAnnuity)	=	Total Accumulation
$48	x		=
Table Values areBased on:
n	=
i	=

Starr Company decides to establish a fund that it will use 2years from now to replace an aging production facility. The companywill make a $107,000 initial contribution to the fund and plans tomake quarterly contributions of $55,000 beginning in three months.The fund earns 8%, compounded quarterly. (PV of $1, FV of $1, PVAof $1, and FVA of $1) (Use appropriate factor(s) from thetables provided. Round your "Future Value Factor" to 4 decimalplaces.)

What will be the value of the fund 2 years from now?

Table Values are Basedon:
n =
i =
	Present Value	f (Future Value Factor)	Future Value
Initial Investment
Periodic Investments
Future Value of Fund

ivorylouse166

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

You work for a small, local telecommunications company. In five years, the company plans to undertake a major upgrade to its servers and other IT infrastructure. Management estimates that it will need up to $450,000 to cover all related costs; however, as a fairly young company, the goal is to pay for the upgrade with cash and not to take out loans. Right now, you have $300,000 in a bank account established for Capital Investments. This account pays 5% interest, compounded annually. A member of the finance department has approached you with an investment opportunity for the $300,000 that covers a five-year period and has the following projected after-tax cash flows: Year Projected Cash Flow 1 $94,000 2 $114,000 3 $134,000 4 $114,000 5 $94,000 Based on this information, answer the following questions: 1) How much money will be in the bank account if you leave the $300,000 alone until you need it in five years? 2) If you undertake the investment opportunity, what is the Nominal Payback Period? 3) Using the Present Value factors for 6% (which can be found on any PV Factor table), what is the discounted Payback Period of the investment opportunity? 4) What is the Net Present Value at 6% of the investment opportunity? 5) Which option (make the investment or leave the money in a savings account) would you recommend to your CEO? Why? What additional factors/information might make you change your point of view?

oliveguinea-pig336

ACCT 3001 Chapter : Chapter 6 Class Examples With Solutions

Document Summary

Get access

Related Documents

ACCT 3001 Chapter : Chapter 6 Class Examples

ACCT 3001 Chapter : Chapter 6 Class Examples

ACCT 3001 Chapter : Chapter 6 Notes

Related Questions