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- 67. Gorman Corporation makes an investment today (Januar

67. Gorman Corporation makes an investment today (January 1, 2006). They will receive $20,000 every December 31st for the next six years (2006 2011). If Gorman wants to earn 12% on the investment, what is the most they should invest on January 1, 2006?

a. $82,228.

b. $92,096.

c. $162,304.

d. $181,780.

68. Renfro Corporation will receive $20,000 today (January 1, 2006), and also on each January 1st for the next five years (2007 2011). What is the present value of the six $20,000 receipts, assuming a 12% interest rate.?

a. $82,228.

b. $92,096.

c. $162,304.

d. $181,780.

69. Pedigo Corporation will invest $30,000 every December 31st for the next six years (2006 2011). If Pedigo will earn 12% on the investment, what amount will be in the investment fund on December 31, 2011?

a. $123,342

b. $138,144.

c. $243,456.

d. $272,670.

70. Wagner Corporation will invest $25,000 every January 1st for the next six years (2006 2011). If Wagner will earn 12% on the investment, what amount will be in the investment fund on December 31, 2011?

a. $102,785.

b. $115,120.

c. $202,880.

d. $227,225.

71. On January 1, 2007, Carly Company decided to begin accumulating a fund for asset replacement five years later. The company plans to make five annual deposits of $50,000 at 9% each January 1 beginning in 2007. What will be the balance in the fund, within $10, on January 1, 2012 (one year after the last deposit)? The following 9% interest factors may be used.

Present Value of Future Value of

Ordinary Annuity Ordinary Annuity

4 periods 3.2397 4.5731

5 periods 3.8897 5.9847

6 periods 4.4859 7.5233

a. $326,166

b. $299,235

c. $272,500

d. $250,000

Use the following 8% interest factors for questions 72 through 75.

Present Value of Future Value of

Ordinary Annuity Ordinary Annuity

7 periods 5.2064 8.92280

8 periods 5.7466 10.63663

9 periods 6.2469 12.48756

72. What will be the balance on September 1, 2013 in a fund which is accumulated by making $8,000 annual deposits each September 1 beginning in 2006, with the last deposit being made on September 1, 2013? The fund pays interest at 8% compounded annually.

a. $85,093

b. $71,383

c. $60,480

d. $45,973

73. If $5,000 is deposited annually starting on January 1, 2007 and it earns 8%, what will the balance be on December 31, 2014?

a. $44,614

b. $48,183

c. $53,183

d. $57,438

74. Henson Company wishes to accumulate $300,000 by May 1, 2015 by making 8 equal annual deposits beginning May 1, 2007 to a fund paying 8% interest compounded annually. What is the required amount of each deposit?

a. $52,205

b. $28,204

c. $26,115

d. $30,234

75. What amount should be recorded as the cost of a machine purchased December 31, 2006, which is to be financed by making 8 annual payments of $6,000 each beginning December 31, 2007? The applicable interest rate is 8%.

a. $42,000

b. $37,481

c. $63,820

d. $34,480

76. How much must be deposited on January 1, 2007 in a savings account paying 6% annually in order to make annual withdrawals of $20,000 at the end of the years 2007 and 2008? The present value of one at 6% for one period is .9434.

a. $36,668

b. $37,740

c. $40,000

d. $17,800

77. How much must be invested now to receive $10,000 for 15 years if the first $10,000 is received today and the rate is 9%?

Present Value of

Periods Ordinary Annuity at 9%

14 7.78615

15 8.06069

16 8.31256

a. $80,607

b. $87,862

c. $150,000

d. $73,125

78. Foley Company financed the purchase of a machine by making payments of $18,000 at the end of each of five years. The appropriate rate of interest was 8%. The future value of one for five periods at 8% is 1.46933. The future value of an ordinary annuity for five periods at 8% is 5.8666. The present value of an ordinary annuity for five periods at 8% is 3.99271. What was the cost of the machine to Foley?

a. $26,448

b. $71,869

c. $90,000

d. $105,600

79. A machine is purchased by making payments of $5,000 at the beginning of each of the next five years. The interest rate was 10%. The future value of an ordinary annuity of 1 for five periods is 6.10510. The present value of an ordinary annuity of 1 for five periods is 3.79079. What was the cost of the machine?

a. $33,578

b. $30,526

c. $20,849

d. $18,954

80. Catt Co. has a machine that cost $200,000. It is to be leased for 20 years with rent received at the beginning of each year. Catt wants a return of 10%. Calculate the amount of the annual rent.

Present Value of

Period Ordinary Annuity

19 8.36492

20 8.51356

21 8.64869

a. $21,356

b. $23,909

c. $29,728

d. $23,492

81. Find the present value of an investment in plant and equipment if it is expected to provide annual earnings of $21,000 for 15 years and to have a resale value of $40,000 at the end of that period. Assume a 10% rate and earnings at year end. The present value of 1 at 10% for 15 periods is .23939. The present value of an ordinary annuity at 10% for 15 periods is 7.60608. The future value of 1 at 10% for 15 periods is 4.17725.

a. $159,728

b. $169,303

c. $185,276

d. $324,576

82. On January 2, 2007, Yenn Corporation wishes to issue $2,000,000 (par value) of its 8%, 10-year bonds. The bonds pay interest annually on January 1. The current yield rate on such bonds is 10%. Using the interest factors below, compute the amount that Yenn will realize from the sale (issuance) of the bonds.

Present value of 1 at 8% for 10 periods 0.4632

Present value of 1 at 10% for 10 periods 0.3855

Present value of an ordinary annuity at 8% for 10 periods 6.7101

Present value of an ordinary annuity at 10% for 10 periods 6.1446

a. $2,000,000

b. $1,754,136

c. $2,000,012

d. $2,212,052

Note: Students must be given interest tables for question 83.

83. The market price of a $200,000, ten-year, 12% (pays interest semiannually) bond issue sold to yield an effective rate of 10% is

a. $224,578.

b. $224,925.

c. $226,654.

d. $374,472.

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