Student Name: Class: Problem 06-05
CLAUSSEN PURCHASE Estimated Cash Flows Yearly Cash Flow $ 70,000 70,000 70,000 Time Period 5 5 5 10 5 5 10 Interest Rate
*Factor
PVA
PV
Years 1-5 Years 6-10 Years 11-20
End of Year 20
400,000
Maximum Purchase Price * Use the Present and Future Value Tables in Appendix 6 or enter the proper formula rounded to 5 decimal places
Given Data P06-05: CLAUSSEN PURCHASE Anticipated cash flows per year for 20 years Selling price in 20 years Desired rate of return: Years 1-5 Years 6-10 Years 11-20 $70,000 $400,000 8% 10% 12%
Student Name: Class: Problem 06-06 Part 1: JOHN JAMISON PV of $1 factor = = *
*Present value of $1: n=?, i=8% (from Table 2, n=approximately Part 2: JASMINE TEA COMPANY Annuity factor = = *
years)
Present value of an ordinary annuity of $1: n=5, i=? (from Table 4, i = approximately Part 3: SAM ROBINSON Annuity amount = * Present value of an ordinary annuity of $1: n=10, i=9% (from Table 4) = = Payment
%)
Given Data P06-06: Part 1: JOHN JAMISON Amount needed to accumulate Amount invested today Desired rate of return: Annually compounded interest Part 2: JASMINE TEA COMPANY Amount paid for merchandise Required annual payments Number of payments required Part 3: SAM ROBINSON Amount borrowed Number of installments Annual rate $10,000 10 9% $28,700 $7,000 5 $600,000 $30,000 8%
Student Name: Class: Problem 06-07 THE LOWLIFE COMPANY Calculations Time PVA Period $250,000 4 $250,000 5 $250,000 $250,000 3 Interest Rate 10% 8% 10% Annuity *Factor Annuity Amount Calculation Payment Payment Payments Interest
Part 1 Part 2 Part 3 Part 4
$51,351 $104,087
* Use the Present and Future Value Tables in Appendix 6 or enter the proper formula rounded to 5 decimal places
Given Data P06-07: THE LOWLIFE COMPANY Amount of loan Part 1: Interest rate Number of payments Part 2: Interest rate Number of payments Part 3: Interest rate Annual payment amount Part 4: Number of payments Annual payment amount $250,000 10% 4 8% 5 10% $51,351 3 $104,087
Student Name: Class: Problem 06-14 HORIZON DISTRIBUTING COMPANY Pension Obligations as of December 31, 2006 Requirement 1: Date of Annual First Payment Payment $20,000 12/31/2009 $25,000 12/31/2010 $30,000 12/31/2011 Time Periods 17 2 18 3 19 4 Interest Rate 11% 11% 11% *Deferred Annuity Factor PV of Pension Obligations
Employee Tinkers Evers Chance
* Use the Present and Future Value Tables in Appendix 6 or enter the proper formula rounded to 5 decimal places Pension Obligations as of December 31, 2006 Requirement 2: PV as of Employee 12/31/2003 Tinkers Evers Chance Total present value Amount of annual contribution: Time Period 3 3 3 Interest Rate 11% 11% 11% *FV Annuity Factor FV as of 12/31/2006
3
11%
* Use the Present and Future Value Tables in Appendix 6 or enter the proper formula rounded to 5 decimal places
Given Data P06-14: HORIZON DISTRIBUTING COMPANY Life expectancy beyond retirement Interest rate Number of equal contributions 15 11% 3 Date of First Payment 12/31/2009 12/31/2010 12/31/2011
Employee Tinkers Evers Chance
Annual Payment $20,000 $25,000 $30,000