Chapter 6

					                                      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

				
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