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