Question

Using a present value table, your calculator, or a computer program present value function, answer the following questions: See Tabl. 6-4 and Table 6-5 (Use the appropriate factor by clicking on the appropriate Table links.) Required: a. What is the present value of nine annual cash payments of $3,000, to be paid at the end of each year using an interest rate of 6%? b. What is the present value of $30,000 to be paid at the end of 22 years, using an interest rate of 18%? c. How much cash must be deposited in a savings account as a single amount in order to accumulate $300,000 at the end of 11 years assuming that the account will earn 10% interest? d. How much cash must be deposited in a savings account (as a single amount) in order to accumulate $50,000 at the end of 10 years assuming that the account will earn 14% interest? e. Assume that a machine was purchased for $53,700. Cash of $15,400 was paid, and a four-year, 8% note payable was signed for the balance. 1. Prepare the horizontal model and record the journal entry, to show the purchase of the machine as described. 2. How much is the equal annual payment of principal and interest due at the end of each year? 3. What is the total amount of interest expense that will be reported over the life of the note? 4. Prepare the horizontal model and record the journal entries, to show the equal annual payments of principal and interest due at the end of each year Answer is not complete. Complete this question by entering your answers in the tabs below. < Prev 3 of 4 !!! Next > arch o II *** E a

Answer 1

(a) Nine annual cash payments= $3000
Interest rate= 6%
Present Value= Cash flowx Present value annuity factor(9 years, 6%)
3000	x (1/1.06)^9=	3000*6.8017= $20405
(b) Cash floww= $30000 to be paid at the end of 22 years
Interest rate= 8%
Present value= 30000x(1/1.08)^22= 30000*0.1839= $5518
© We will use the formula A= P(1+r)^t
A= 300000   t= 11 years    r=10%
P(1.1)^11= 300000
P*2.8531= 300000
P= $105150 (approximately) must be invested
(d) We will use the formula A= P(1+r)^t
A= 50000, t= 10 years, r= 14%
P(1.14)^10= 50000
P*3.7072= 50000
P= $13487 must be ivested