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Solve the following and please show work
4. You wish to withdraw $50,000 every December 31st for the next six years (2018 2023), and you estimate that you will earn 8% on the investment, what is the most you need to invest today? (Round to the nearest S and use tables). 5. Addison Corp issued a 6% note payable in the amount of $4.8 million on October 1, 2017. The note is payable in four equal annual payments of $1.2 million plus interest. The first interest and principal payment was made on October 1, 2018. Addisons fiscal year end is June 30th. On Addisons balance sheet at June 30, 2019, what amount should be reported as Interest Payable for this note? 6. On January 1, Year 1, Brown Mining Enterprises purchases an existing coal mine. Brown expects to operate the mine for four years, after which it is legally required to dismantle the mine. Brown estimates that it will pay $50o,ooo at the beginning of Year 5 to dismantle the mine. What would be the balance of the Asset Retirement Obligation (ARO) at the end of Year 2? Brown Mining has an incremental borrowing rate of 7%.
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4 Withdrawals $50,000 per year for six years PVA (8%,6 years)-4.62288 Amount to be invested today $50,000 * 4.62288 $231,144 5 Annual payments of principal $48,000,000/4 $12,000,000 Amount of note payable on October 1, 2018 Note payable as on October 1, 2017 - First Principal repayment $48,000,000 $12,000,000 $36,000,000 Interest payable at June 30, 2019-Amount outstanding on October 1, 2018 696 9/12 -$36,000,000 * 6% * 9/12-$1,620,000 6On January 1, Asset Retirement Obligation will be present value of dismantling the mine at the end of year 5 Present value of dismantling-PV (796, 5 years) * $500,000 0.71299$500,000 $356,495 Asset retirement obligation increases over time as a result of unwinding of discount which is recognised as interest expense. Interest expense for year 1-$356,495 * 7%-$24,955 At the end of year 1, Carrying value of asset retirement obligation $356,495 $24955 $381,450 Interest expense for year 2-$381,450 * 7%-$26,702 The balance of Asset Retirement Obligation at the end of year 2 $381,450 $26,702 - $408,152

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