BRIEF EXERCISE A–18
i = 5%
0 1 2 3 4 9 10
Discount rate from Table 4 is 7.72173. Present value of 10 payments of
BRIEF EXERCISE A-19
i = 8%
? $40,000 $45,000 $50,000
0 1 2 3
To determine the present value of the future cash inflows, discount the future
cash flows at 8%, using Table 3.
Year 1 ($40,000 X .92593) = $ 37,037.20
To achieve a minimum rate of return of 8%, Leffler Company should pay no
BRIEF EXERCISE A–20
i = ?
$4,765.50 $12,000
0 1 2 3 4 11 12
The .39713 for 12 periods approximates the value found in the 8% column
BRIEF EXERCISE A–21
i = 11%
$29,319 $75,000
n = ?
BRIEF EXERCISE A–22
i = ?
? $1,200 $1,200 $1,200 $1,200 $1,200 $1,200 $1,200 $1,200
0 1 2 3 4 5 6 14 15
$10,271.38
Present value of an annuity factor = $10,271.38 ÷ $1,200 = 8.55948
BRIEF EXERCISE A–23
i = 9%
$1,300 $1,300 $1,300 $1,300 $1,300 $1,300
$6,542.83
n = ?
Present value of an annuity factor = $6,542.83 ÷ $1,300 = 5.03295
BRIEF EXERCISE A–24
i = 9%
?
$2,700
$2,700
$2,700
$2,700
$2,700
$2,700
$2,700
0
1
2
3
4
5
6
7
$2,700 each discounted at 9% is therefore $13,588.97 ($2,700 X 5.03295).
BRIEF EXERCISE A–25
i = 11%
?
$20,000
$30,000
$40,000
0
1
2
3
cash flows at 11%, using Table 3.
Year 1 ($20,000 X .90090) =
$18,018.00
Year 2 ($30,000 X .81162) =
24,348.60
Year 3 ($40,000 X .73119) =
29,247.60
Present value of future cash flows
$71,614.20
return will be greater than 11%.
BRIEF EXERCISE A–26
10*
?
–18,000
0
50,000
N
I/YR.
PV
PMT
FV
10.76%
BRIEF EXERCISE A–27
10
?
60,000
–8,860
0
N
I/YR.
PV
PMT
FV
7.80%
BRIEF EXERCISE A–28
40
?
178,000*
–8,400
0
N
I/YR.
PV
PMT
FV
3.55%
(semiannual)
BRIEF EXERCISE A–29
(a)
Inputs:
7
6.9
?
–16,000
0
N
I
PV
PMT
FV
Answer:
86,530.07
(b)
Inputs:
10
8.65
?
14,000**
200,000*
N
I
PV
PMT
FV
Answer:
–178,491.52
*200 X $1,000 **$200,000 X .07
BRIEF EXERCISE A–30
(a)
Note—set payments at 12 per year.
Inputs:
96
7.8
42,000
?
0
N
I
PV
PMT
FV
Answer:
–589.48
(b)
Note—set payments to 1 per year.
Inputs:
5
7.25
8,000
?
0
N
I
PV
PMT
FV
Answer:
–1,964.20